Top 10 Most Overlooked Tax Deductions
- March 24th, 2015
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As April 15 approaches, everyone searches for ways to increase tax deductions. Even with a Certified Public Accountant’s services, many taxpayers miss some or all of these most overlooked tax deductions every year. With our Top 10 List, anybody can easily increase the size of their tax return.
Don’t miss these 10 commonly overlooked tax deductions
10. Baggage fees for self-employed business travelers
Business travel expenses add up quickly. For those without corporate credit cards, any and all deductions are welcomed news. Our list of the most overlooked tax deductions begins with this valuable tip: self-employed individuals may deduct baggage fees on their tax returns.
9. Job-hunting costs
Unemployed Americans who landed jobs within the last year are eligible to deduct job hunting costs as miscellaneous expenses if they itemize. These deductible costs include transportation expenses, food and lodging expenses, employment agency fees and the cost of printing resumes, business cards and postage.
8. Out-of-pocket charitable donations
Most people know that large charitable donations are tax deductible, but among the most overlooked tax deductions are small, out-of-pocket charitable donations. For those with big hearts, a deduction for numerous small donations translates into big savings. Keep all your receipts, but if the donation adds up to more than $250, an acknowledgement from the charity is required.
7. Legal fees paid to secure alimony
Court costs and legal fees for divorce proceedings are generally not tax-deductible. However, another one of our commonly overlooked tax deductions is that legal fees paid to secure alimony are tax-deductible. To earn this deduction, make sure your attorney itemizes all legal bills.
6. American Opportunity Credit
Good for all four years of college, this tax credit is based on 100 percent of the first $2,000 spent on qualifying college expenses and 25 percent of the next $2,000. The maximum annual credit per student is $2,500. The full credit is available to individuals whose modified adjusted gross income is less than $80,000 or for married couples filing a joint return less than $160,000.
5. Lifetime Learning Credit
This college credit for those long out of college can be claimed for more than four years for both you and your spouse. The Lifetime Learning Credit is worth up to $2,000 a year. It is based on 20 percent of up to $10,000 spent on post-high-school courses that lead to new or improved job skills. Seniors can also receive the credit for classes taken in retirement at a vocational school or community college.
4. Moving expenses for a first job
First-time job hunters cannot deduct job searching expenses on their tax return. However, if a person’s first job is 50 miles or more away from their home, they are eligible for a tax deduction. For those who qualify, the expenses associated with transporting yourself and your possessions to a new area is tax deductible.
3. Credits for energy saving homeowners
Homeowners that have installed alternative energy equipment, such as solar hot water heaters, geothermal heat pumps and wind turbines are eligible for major savings. As much as 30 percent of the total cost, including labor, is eligible for this credit.
2. Mortgage points
New homeowners can deduct the points paid to secure a mortgage all at once. The IRS allows the deduction of 1/30th of the mortgage points a year. For example, a homeowner with a 30-year mortgage can deduct $33 a year for each $1,000 of points. However, when refinancing a homeowner must deduct the points on the new loan over the life of the mortgage.
1. Child-care credit
Parents may qualify for a tax credit worth 20 to 35 percent of child care costs while they work. A credit is much better than a deduction, because it reduces a tax bill dollar for dollar rather than by a percentage. The credit is good for up to $3,000 for one child or $6,000 for two or more children under the age of 13.
JRH & Associates, Inc., is an accounting, tax, and business consulting firm backed by over 20 years of experience. If you have any further questions about overlooked tax deductions or any other accounting questions, please feel free to call JRH Associates at 516-794-5752