There are many people currently rolling in their tax check and stocking up on furniture, big screen TV’s, and vacations. Others have waited a little bit longer and are carefully looking over their paperwork, in an attempt to make sure they are maximizing their gains for this April. Then there are the rest of us that have just been lazy and have been putting off doing our taxes. Don’t worry I wont judge you, I normally put off doing my taxes because I end up having to pay extra most of the time. Taxes are notoriously confusing and tricky to handle properly. With a little bit of research, you can discover a few quick tips and strategies to implement into your own taxes, to maximize your return and tax advantage of any and all tax deductions you have coming to you.
Below are the most overlooked tax deductions.
1. Sales Tax: We begin with this strongly overlooked tax break, the state sales tax. A few states do not collect an income tax (Florida, Texas, and Washington to name a few). For people living in a state that does not collect income tax, it would be wise to claim a sales tax deduction. Most states allow the citizens the choice between the income state tax and the state sales tax. Without that choice, it would be smart to go with the sales tax over nothing. An income tax is likely higher, making room for a sensible write-off in the state sales tax for these key states.
2. Charity: Many do not write-off their charitable donations. For one, it may make them feel guilty as they are likely not donating because of any monetary benefit. But it is allowable by law, and a major money saver if you are a giver. Some people even give to charity out of their paychecks every week in an automated process they are largely unaware of. Throughout the course of the year these donations may seem small but they add up, so don’t overlook them.
3. Child Dependent: You would be surprised by how many people miss this obviously huge deduction. A child is expensive to care for, and the government offers relief for those who have one. This comes in the form of a $2,100 deduction, an amount that can substantially save you come tax season. Do not forget individual child related deductions. Summer camp is a big one that can be deducted, and forgotten often.
4. Tax Preparation Fees: You may have all your information gathered, and you are now prepared to get them filed. What many people do not realize is that, yes, you can write-off any expenses you pay in filing your taxes. This may seem counter-intuitive but make sure that as a professional is handling your paperwork, you or they check off the amount that it is costing you to have your paperwork handled!
5. Volunteer: When it comes to charity, many people will deduct physical costs, such as the slip of paper they get after donating to Goodwill. But they often overlook any amount spent while actually volunteering. A big ticket item here is the gas you spent volunteering. At 14 cents a mile, you have a great opportunity to write-off any expenses related to your trips to and from your volunteer work.
6. Unemployment: I am often asked, do you pay taxes on unemployment? Over the last few years it seems all we hear about unemployment in America every day in the news. Unemployment has touched all of us, whether it has been you personally, family, or a friend it seems we can all name at least one person who has had to deal with this. But when it comes to finding a new job you can deduct any expenses you procured while actually looking for a job. This includes gas expenses built up while driving to the job fair or paper expenses established while printing out resumes. Unemployment is tricky and precarious to manage in your home life, but there is that mild tax benefit to look forward to. But there are a few specifics you must understand. The expenses must exceed 2% of your gross income of that year, otherwise it is considered too marginal to actually qualify. The deduction only includes job expenses for finding a job that is already in your line of work, and the expenses are directly related to your job search. No writing off McDonald’s tax receipts or that smart phone you bought to download apps for, um, finding your new job.
7. Previous State Tax Liability: if you paid state tax liabilities last year, you are up to deduct these expenses in your new form. This could be a doubling up, and a substantial write-off for those who paid high liabilities last year.
8. Alimony: Unlike child support, alimony expenses are tax deductible. This means that there are ex-spouses out there missing out on a fantastic tax write-off each and every year.
9. Moving: Deducting you moving expenses can really add up. If your new job is at least 50 miles away from your previous location, you can deduct any expenses in dealing with this transport and move. Of course, the reason for the move has to be related to work. You cannot move to that amazing place you dreamed of just for the sake of moving. These expenses are overlooked and can be extremely beneficial and add up quick for those who went through this situation.
10. Gambling: If you went through a bad gambling streak last year, you can always counter those “expenses” against any winnings you had. If your gambling record breaks down to a $10,000 loss for the year, you have a deduction that is sizable. Of course, no one wants to promote gambling or lose any money doing so, but there is that little tax break quirk that very few know about beyond consistent and heavy gamblers.
Taxes are confusing, constantly changing, and can leave unaccustomed filers confused and frustrated. But with the above points, you may find yourself with a checklist of deductions you totally missed. Many individuals file their taxes, and totally miss substantial deductions that they were simply unaware of. Take advantage of the long list of tax deductions that the government allows, and honesty is the best policy in maximizing your tax write offs fairly and legitimately. You will find plenty of savings without resorting to cheating.
Author: KC Beavers
KC Beavers is a semi-retired entrepreneur. The subject of personal finance has always fascinated him. In an effort to not bore those around him with all his love of personal finance as much he has come here to bore all of you instead.
Good list KC! My brother is an accountant so that helps us out, but I still like to do it myself. Definitely a complex and changing system...
There are a lot of people actually who tend to forget about these tax deductions, which, mind you, can save them thousands in taxable income. They can forget something as simple as medical expenses, mortgage pre-payment penalty, and yeah, gambling and sales tax.