5 Commonly Overlooked Tax Deductions
5 Commonly Overlooked Tax Deductions Many Taxpayers Fail to Use
When you’re paying taxes for things that count as write-offs, you’re essentially throwing away money that should belong in your bank account. To avoid losing any more of your hard-earned dollars, take a look at this list of the 5 most commonly overlooked tax deductions you should be tracking throughout the year.
That old couch you donated to Goodwill? The $50 check you give your local homeless charity each month? They’re not just gestures of benevolence. They’re also opportunities to reduce your annual income tax. In fact, taxpayers who itemize can get as much as 20% to 60% written off their adjusted gross income (AGI). Just note that the deduction amount does vary depending on the type of contribution and type of charities you donate to. Not sure what organizations qualify for tax deductible donations? Check out this helpful resource by the IRS.
Did you pay a hefty amount in medical expenses this year? If that’s the case, don’t panic. Taxpayers can file for tax deductions based on their medical expenses that are 7.5% of their AGI or more. However, there are a few caveats to keep in mind. First, insurance company reimbursements do not count towards this type of tax deduction. Additionally, if your insurance reimburses you in future tax years for medical expenses you write off this year, you must include that reimbursement amount as part of your income in future tax filings.
Homeowners, this one’s for you. Though mortgage payments are not tax deductible, mortgage interest certainly is. This is great news, especially for new homeowners since interest generally makes up a large portion of monthly payments during the early years of a mortgage. This deduction isn’t limited to the interest you paid on purchasing your primary home either. It also counts towards loans you took out to build or improve your home, plus a second home that you may have bought for vacations, so make sure to factor those numbers into your write off, if they’re applicable.
Earned Income Tax Credit
Far too often, individuals and families fail to consider the earned income tax credit when filing their taxes. In fact, according to the IRS, 25% of taxpayers who are eligible for EITC don’t even claim it! For some, the rules are too convoluted. For others, they aren’t aware that they qualify. Though the EITC is a credit rather than a deduction, it can help save you thousands. It was designed to supplement wages of low-income workers; however, if you are a “middle class” worker who lost a job, took a pay cut, or worked fewer hours this year, you may qualify as well.
If you’re self-employed and use part of your home as an office, you definitely shouldn’t overlook this tax break. Applying this write off allows you to deduct a portion of your homeowners insurance, utilities, rent or mortgage interest, and property taxes based on the percentage of your home that is part of your home office. Alternatively, you can deduct $5 per square foot of your home office, with a maximum deduction of $1,500 for a total of 300 square feet.
Filing Taxes Online
When filing taxes online, it’s easy to get lost in the mire of rules and nuances that litter every step of the way. Not to mention it can be time consuming and there’s always the chance that no matter how often you double check your calculations, there may still be overlooked tax deductions you’re not tapping.
The stress is real. We get that. Which is why we designed EZ Online Taxes to not only be one of the most affordable DIY tax preparation services on the entire internet, but to also net you the biggest refund possible based on your circumstances. Making sure you receive your fair share at a reasonable price isn’t just an obligation, it’s our mission.