Overlooked Tax Deductions
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 tax deductions that are overlooked 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. This area especially, is where overlooked tax deductions are found.
There are many tax deductions that are often overlooked, in medical expenses. These expenses can include co-pays, prescription drug costs, lab fees, and medical insurance premiums paid for with after-tax dollars. Depending on your situation, you may even be able to deduct dental expenses such as dentures or artificial teeth. For elderly people, these expenses can add up quickly. Fortunately, these expenses can be deducted if they total more than 7.5% of your AGI.
It is important to keep accurate records of medical expenses. It’s easy to lose track of what you spent on medical care over the course of the year. That’s why keeping an organized folder for receipts and medical supplies is so important. You can separate your receipts by type of medical expense and add them up when tax time comes around. For more help, consider using a tax program like EZ Online Taxes to calculate your medical expense deduction. This is one area of overlooked tax deductions you can’t afford to miss.
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. This one of the often overlooked tax deductions can really boost a refund.
If you’re money 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 some common overlooked tax deductions you’re not tapping.
There are many tax deductions that are overlooked by taxpayers. Some of them include contributions to a traditional IRA, Medical expenses, and Jury pay. If you make an eligible donation, you may be able to deduct the points that were paid in order to secure the loan. Another common deduction is loan interest. These are just a few of the many deductions that you can claim for yourself. The deductions can be as large or as small as you would like.
Contributions to a traditional IRA
While it’s true that the tax code has been in flux since the last recession, contributions to a traditional IRA are still eligible for tax deductions. In fact, you can double the retirement savings of your non-working spouse by making contributions to the account together. But only if you are able to find a job that offers you that opportunity. And, of course, your employer needs to match your contribution.
Those who don’t have a retirement plan through their employer can take full deductions up to a certain limit, or partially, if they are between $198,000 and $208,000. Traditional IRA contributions are tax-deductible only if you make the same amount as your spouse. Those who don’t have any retirement plan through their employer are generally eligible to take a full deduction, but the spouse who’s covered by the plan can claim a partial deduction.
In addition to your salary, you can deduct jury pay on your tax return under certain conditions. Many employers pay the employee’s regular salary, and then require that the amount of the Jury duty pay be reimbursed back to them. You must include jury pay in your income as miscellaneous income, and then deduct it as reimbursed to your employer. For nonexempt employees, this overlooked tax deduction will reduce your tax bill. If you’re not sure about jury pay, consult your tax professional.
In some cases, employers may choose to top up the jury allowance. If you’re working out of state, the jury pool officer can help you apply for this benefit. You can also request a hearing before the court. Generally, jury pay in excess of $600 must be reported on an IRS Form 1099-MISC. If your jury pay doesn’t come with a 1099-MISC, the court will still deduct the court allowance from your usual take-home pay.
Using your pet as a therapy animal can be a great way to reduce your taxes and is another of overlooked tax deductions. Of course, you have to be able to prove that the animal is helping you in some way, and you’ll need to keep accurate records of the hours spent working with your pet. A letter from your physician explaining this is a good thing to keep in your file.
A guard dog guarding a business is likely to qualify for tax deductions, but a cat greeting customers wouldn’t be. You can, however, claim a business expense for keeping your pet, if you use it for therapy work. Cat lovers still may be able to claim an expense. If you have a legitimate business and say, have a rodent problem, a cat could qualify. There have been several cases where the IRS accepted that deduction.
You may be able to claim expenses for food, training, and veterinary care for your pet. These expenses would be deducted on your business schedule in each case. Keeping your receipts will help you maximize your deductions. You may also be able to claim charitable contributions for your pet’s expenses. It’s always a good idea to keep all receipts for any expenses, including pet food.
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. Maybe some of these overlooked tax deductions will help. Making sure you receive your fair share at a reasonable price isn’t just an obligation, it’s our mission.