8 Things You Might Not Realize Are Taxable
It’s known that wages are taxed by the federal government, but the ‘taxable income’ has a far wider definition than just steady income. Taxable income covers various types of earnings that many people usually don’t realize are subject to federal income taxes.
You may be surprised at what you can actually save up money on. Get familiar with top 8 things you didn’t know that was tax-deductible. This is something you really shouldn’t overlook.
1. Paying The Babysitter
If you are a proud parent of one child or more children you know how stressful it can be when you have to leave them alone home, or with a stranger. Therefore, finding the right babysitter will motivate you to easily pay a significant amount of money for a couple of hours.
After all, there can’t be a price for your children’s safety and well-care, right? Accordingly, you might be able to deduct the cost of a babysitter if you’re paying him or her while you’re volunteering.
2. Lifetime Learning
If you love being a life-long book worm or you just have to prosper because your job demands that from you, you are ready for some tax deduction. The tax code offers several dedications when it comes to a college student.
Actually, the lifetime learning credit can provide up to $2,000 per year taking off 20 percent of the first $10,000 you spend for education after high school.
3. Extraordinary Business Expenses
If you have to use something unusual to benefit your business and you can provide the reasons for it, you can deduct it off as your business income. For example, if you have an open sale place for cars, and you want to keep the stray cat around your sale area to keep the rodents away, you can deduct the cost of cat food.
Once a bodybuilder managed to deduct the tax for the oil that he used in the competition.
4. Looking For Job
Looking for the job is never an easy task. You need to invest your time into the research, to know what you are looking for and to talk with a full line of people within the industry that sparks your interest. So, prior to 2018, if you are looking for a job in the same field you can itemize your deductions.
These expenses exceed 2 percent of your adjusted gross income. Job-hunting costs add up quickly – just think about printing resumes, driving to the interview and back, buying interview clothes and so on.
5. Self-Employed Social Security
Being self-employed has its perks, but when it comes to tax deduction it’s not all sugar, spice, and everything nice. Moreover, if you are self-employed there are some bad news for you.
You have to pay in total 15.3 percent of your income for medicare taxes and social security. This portion is usually paid by both the employer and the employee. But, you do get to deduct the 7.65 percent employer portion off your income taxes.
6. Sales Taxes
You have the option of deducting sales taxes or even state income taxes off your federal income tax. This is a major money saver if you are in a state that doesn’t have its income tax.
Basically, even if you paid state taxes, the sales tax break can easily be a better deal if you make a big purchase (big purchase is buying a car). Of course, you will have to itemize to take the deduction, but the IRS provides tables for you to use as a guide.
7. Tax Savings For Teacher
Teachers usually have to reach into their own pockets and to buy items needed for the classroom from time to time. Truly, it’s rare to find a teacher who doesn’t have to do so. Most of the time it seems like nobody appreciates this, but the IRS does. It allows qualified K-12 educators to deduct up to $250 for materials. Not too shabby.
8. Charitable Gifts
Most taxpayers are well familiar with this practice. You can deduct money or goods given to charitable organizations. But, while you are doing so are you making the most of this benefit? You should bear in mind that out-of-pocket expenses for charitable work also qualify for money deduction.
For example, if you are using muffins for a charity fundraiser, you can deduct the cost of the ingredients you used to bake them. So, with this option saving the recipe gets a whole new dimension here. It helps to save the receipts in case of an audit.