16 Great Tax Deductions You May Have Overlooked
1. Non-Cash Charitable Contributions
Many people tend to overlook that items donated to local Goodwill or the Salvation Army are in fact basis for tax benefit. By keeping track of those items and documenting your donations, you should be able to deduct the lesser of your basis for their fair market value at the time you donate items. If an item you donated is a gift basis would be the cost to the person who gifted it to you, and in case you inherited it – the basis would be fair market value at the date of that person’s death.
2. Sales Taxes
Sales taxes can be means for tax benefit for people living in those states that don’t have the state income tax. For example, for the vehicle purchased in one such state, add the amount of sales tax paid on the transaction to the amount on the IRS chart, the table that indicates the amounts of sales tax deductible by state. If the result is bigger than state income taxes would be, don’t miss the chance.
3. State Income Taxes Paid with Last Year’s Return
Many people seem to forget to mention the amount they paid in the past year’s income tax return when applying for the ongoing one. Income taxes may provide the greater deduction, but a significant number of people seems to be either unaware or not too interested in that fact.
4. Personal Property Taxes
A number of states consider owning a car, boar or a luxury asset to be a basis for personal property tax on it. Sometimes it is included in a licensing fee for the vehicle. It can also be billed as personal property tax by the country. Whichever of these variations may apply to you – it is worth double checking.
5. Points Paid on Purchasing or Refinancing Your Home in 2010
Points paid on the purchase of the personal residence in, for example, 2016, grant the entire amount to be deductible in 2017. If you refinanced your home in 2016 by paying points, you have to amortize those points, deducting them bit by bit over the length of the loan. In practice, it means that if you paid $3,600 in points to refinance your home over a 30-year mortgage, you would be deducting $10 monthly over the length of the loan.
6. Points Paid in a Prior Year
If by any chance you amortized points paid on refinancing home on the previous year’s tax return, you can deduct those in years to follow. As long as the life of the loan is, you should keep in mind that you can keep deducting them over the full length of the loan, up until it expires.
7. Job-Hunting Costs
The heading “Miscellaneous Itemized Deductions” is a chance for a tax deduction for all the first time job hunters, and it means that the job hunting expenses such as long-distance calls, travel to and from interviews and meetings, postage, and printing may, in fact, be deductible, helping your cause to exceed 2% of your AGI, along with tax-preparation costs, safe deposit box fees, unreimbursed business expenses etc.
8. Armed Forces Reservists’ Expenses
Reservists in the armed forces get different treatment regarding business expenses. Qualifying expenses for traveling more than 100 miles from home do not require itemization or 2% reduction but go straight from Form 2106 to line 24 of Form 1040. This deserved break comes from your country being your ’employer’.
9. Moving Expenses to Take a New Job
Recognizing moving expenses in order to take a new job is good news for non-itemizers. If you have to move more than 50 miles away from your old home in order to take a new job, keep track of the moving costs, including mileage of your car, transportation of the household goods and personal things, as well as the logging while on the road. To make sure whether you meet these requirements, check IRS Form 3903
10. Educator Expenses
Eligible educators, the category including instructors, K-12 teachers, principals, counselors and aides who work over nine hundred hours during the year at school can deduct up to $250 over the expenses paid out of their own pockets in connection to the work. Spouses who are both educators can deduct $250 each.
11. Energy Saving Home Improvements Credit
Investments you make regarding your home improvement such as insulation, doors, windows and roofing fall under the energy-efficient improvements and are eligible to a credit against your taxes. The maximum amount of the credit goes up to 30% of the investment. Form 5695 contains the instructions regarding
energy-saving home improvements credit.
12. First-Time Homebuyer and Long-Time Resident Homebuyer Credits
First-time homebuyers’ credit applies if neither you nor your spouse has owned home in the past three years. The long-time resident homebuyer credit applies to you and your spouse if you have lived in the same residence for any five consecutive years of the eight-years-long period ending on the date the new home was bought by you or your spouse. For details, see IRS Form 5405.
13. Health Insurance Reduction to Self-Employment Income
Self-employed people should pay close attention to Health Insurance Reduction to Self-Employment Income. You are allowed to reduce your AGI by varying your self-employment income percentages. That gets both regular income tax and self-employment tax based on that same reduction. This deduction is somewhat hidden in Schedule SE, line 3, so attention is required.
14. Reinvested Dividends
Reinvested dividends deduction is an interest of the smaller group of taxpayers, those selling mutual funds and stock in which their dividends have been reinvested, in order to buy more of the investment. Taxes paid on the dividends, although dividends haven’t received checks, so the reinvested ones add to the basis of the stock sold.
15. American Opportunity Credit
IRS Publication 970 — Tax Benefits for Higher Education provides information regarding the American Opportunity Credit, allowing up to $2500 of qualifying expenses for a qualifying student, to offset income taxes for as long as four years. This does not apply alongside Lifetime Learning Credit, which allows up to $2000 per year.
16. Student Loan Interest Paid for You by Your Parents
If your student loan interest is paid for you by your parents, you still qualify for the deduction if:
1. Your filing status is not “married filing separately”
2. You (and your spouse if filing jointly) are not claimed as a dependent in the exemptions section of another person’s tax return
3. You are legally obligated to pay interest on a qualified student loan
4. You paid interest on a qualified student loan
Your parents, however, are not allowed to deduct their own interest, because they are not legally obligated to pay your interest (3) and in the eyes of the IRS, money given to you by your parents is considered a gift to you, which you used to pay yourself. This is an adjustment to your income, so it requires no itemization to benefit.