Tax Season is upon us, and if you’re like most Americans, you’re dreading the possibility of owing the Government money. But did you know there’s something else to think about?
Are you sure you’re claiming all the tax deductions you deserve?
Below is an abridged version of TurboTax’s list of their 10 most overlooked tax deductions. For full details on each deduction, read: The 10 Most Overlooked Tax Deductions
State Sales Taxes This write-off makes sense primarily for those who live in states that do not impose an income tax. You must choose between deducting state and local income taxes, or state and local sales taxes…The IRS even has a calculator on its Web site to help you figure out the deduction, which varies by your state and income level.
Reinvested Dividends This isn’t really a deduction, but it is a subtraction that can save you a lot of money…Forgetting to include the reinvested dividends in your cost basis—which you subtract from the proceeds of sale to determine your gain—means overpaying your taxes.
Out-of-Pocket Charitable Contributions …you can write off out-of-pocket costs you incur while doing good deeds. Ingredients for casseroles you regularly prepare for a nonprofit organization’s soup kitchen, for example, or the cost of stamps you buy for your school’s fundraiser count as a charitable contribution.
Student Loan Interest Paid by Mom and Dad In the past, if parents paid back a student loan incurred by their children, no one got a tax break. To get a deduction, the law said that you had to be both liable for the debt and actually pay it yourself. But now there’s an exception. If Mom and Dad pay back the loan, the IRS treats it as though they gave the money to their child, who then paid the debt.
Moving Expense To Take First Job …Job-hunting expenses incurred while looking for your first job are not deductible, but moving expenses to get to that first job are. And you get this write-off even if you don’t itemize.
Child Care Credit A credit is so much better than a deduction—it reduces your tax bill dollar for dollar…it’s easy to overlook the child care credit if you pay your child care bills through a reimbursement account at work…up to $6,000 can qualify for the credit, but the old $5,000 limit still applies to reimbursement accounts.
Earned Income Tax Credit (EITC) Millions of lower-income people miss out on this every year…The EITC is a refundable tax credit – not a deduction – ranging from $457 to $5,666. The credit is designed to supplement wages for low-to-moderate income workers…The exact refund you receive depends on your income, marital status and family size.
State Tax You Paid Last Spring Did you owe taxes when you filed your 2009 state tax return in the spring of 2010? Then remember to include that amount with your state tax itemized deduction on your 2010 return, along with state income taxes withheld from your paychecks or paid via quarterly estimated payments.
Refinancing Points When you buy a house, you get to deduct points paid to obtain your mortgage all at one time. When you refinance a mortgage, however, you have to deduct the points over the life of the loan. That means you can deduct 1/30th of the points a year if it’s a 30-year mortgage…in the year you pay off the loan—because you sell the house or refinance again—you get to deduct all the points not yet deducted, unless you refinance with the same lender.
Jury Pay Paid To Employer Some employers continue to pay employees’ full salary while they are doing their civic duty, but ask that they turn over their jury fees to the company coffers…If you give the money to your employer you have a right to deduct the amount so you aren’t taxed on money that simply passes through your hands.
