Tax Deductions Not to Miss
Filing taxes is a daunting task but nothing is more frustrating than that nagging feeling that there may be a credit or deduction you missed. Jeanette Pavini is here with a couple of ways you may be able to save on your taxes.
While eligibility often depends on your income and other factors, here are 5 often missed deductions and credit you may want to ask your tax about. The first deduction often overlooked is if your child went to camp last year:
If your child went to camp last year, it may be worth asking…
Summer day camps may qualify for a tax credit if you child is under 13 years old and you had to enroll them in camp so you could work or look for work. Expenses for overnight camps do not count. This is part of the child and dependent care credit, which also can include afterschool programs, babysitters, and other care-related expenses.
A LOT OF ADULTS THINK OF THEIR KIDS FOR CREDITS, BUT WHAT ABOUT CREDITS IF YOU ARE CONTINUING YOUR EDUCATION?
If you bought textbooks, it may be worth asking…
There are two tax credits available for higher education, Lifetime Learning Credit and American Opportunity Credit. You can only choose one of the credits per student. The American Opportunity Tax Credit can be claimed for expenses the first four years of post-secondary education and includes expenses for course-related books, supplies and equipment – even if they weren’t necessarily bought from the education institution itself.
OTHER POTENTIAL TAX BENEFITS FOR PEOPLE EITHER OUT OF WORK OR STARTING AN AT HOME BUSINESS?
If you were on the job hunt, it may be worth asking…
If you were looking for a job in the same field as your previous position, then you may qualify for itemized deductions. Mileage, airfare, employment agency or counseling fees, long distance calls, and postage may all be considered deductible expenses. Interview outfits and first time job hunts don’t count.
If you work out of your home, it may be worth asking…
If you regularly use part of your home exclusively for business, you may qualify for a home office deduction. Usually, this deduction is calculated based off the percentage of your home used for business purposes. Employees may also qualify if they use a home office for the convenience of their employer.
DONATING TO CHARITY CAN GET CONFUSING AS TO WHAT IS DEDUCTIBLE
If you gave a little time or money to charity, it may be worth asking…
It’s not just the big checks that count! Out-of-pockets expenses add up and in some cases, qualify for a deduction. You may be able to deduct mileage (14 cents/mile), the buying and cleaning of uniforms, and materials used like stamps for a mailing.
This isn't a tax deduction, but it is an important subtraction that can save you a bundle. And former IRS commissioner Fred Goldberg told Kiplinger that missing this break costs millions of taxpayers a lot in overpaid taxes.
If, like most investors, you have mutual fund dividends automatically used to buy extra shares, remember that each reinvestment increases your tax basis in the fund. That, in turn, reduces the taxable capital gain (or increases the tax-saving loss) when you redeem shares. Forgetting to include reinvested dividends in your basis results in double taxation of the dividends—once in the year when they were paid out and immediately reinvested and later when they're included in the proceeds of the sale.
Don't make that costly mistake.
If you're not sure what your basis is, ask the fund for help. Funds often report to investors the tax basis of shares redeemed during the year. In fact, for the sale of shares purchased in 2012 and later years, funds must report the basis to investors and to the IRS.
2. Health Insurance Premiums
Medical expenses can blow any budget, and the IRS is sympathetic to the cost of insurance premiums – at least in some cases. For most taxpayers, medical expenses have to exceed 7.5 percent of your adjusted gross income to be deducted. However, if you’re self-employed and responsible for your own health insurance coverage, you can deduct 100 percent of your premium cost. That gets taken off your adjusted gross income rather than as an itemized deduction.
Military reservists' travel expenses
Members of the military reserve forces and National Guard who travel more than 100 miles and stay overnight for the training exercises can deduct related expenses. This includes the cost of lodging and half the cost of meals. If you drive to the training, be sure to track your miles. You can deduct them on your 2014 return at 56 cents per mile, along with any parking or toll fees for driving your own car. You get this deduction whether or not you itemize; it's one of the above-the-line deductions found directly on form 1040. But you will have to fill out Form 2106.
Most taxpayers know they can write off many moving expenses when they relocate to take another job. But what about your first job? Yes, the IRS allows this write-off then, too. A recent college graduate who gets a first job at a distance from where he or she has been living is eligible for this tax break. This tax break is found in the adjustments to income section at the bottom of Form 1040.
Mortgage refinance points
When you buy a house, you get to deduct the points paid on the loan on your tax return for that year of purchase. But if you refinance your home loan, you might be able to deduct those points, too, as long as you use refinanced mortgage proceeds to improve your principal residence.
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