7 Tax Deductions You Don't Want to Miss out On
, by Rob Kaufman
For some of us it might be an "ugh!" For others a "yay!" It all depends on whether you owe money to the government or it owes money to you. With Tax Day approaching, there are a few deductions you might not know about that we'd like to share - hopefully, they can help change an "ugh!" into a "yay!"
The first thing to know about Tax Day 2017 is that it falls on April 18 (Tuesday). Although the regular tax return filing deadline is April 15, this year that particular day falls on a Saturday. In addition, the Washington D.C. Emancipation Day holiday is being observed on April 17 (Monday) so Tax Day will be on April 18.
With those timing logistics out of the way, let's get to the good stuff...
Did you know you can deduct...
The last thing you want to do is submit your tax returns only to find out the next day that there were deductions you could've taken but didn't. If any of the deductions mentioned below apply to you, you might be able to lower your tax bill or increase your refund. So keep an eye out for something that can help you before April 18 comes along.
Medical Expenses. We're all too aware of the high cost of medical expenses, including insurance. For most of us, medical expenses can only be deducted once they exceed 7.5% of your adjusted gross income. If you are self-employed and responsible for your own health insurance coverage, you can deduct 100% of your premium from your adjusted gross income.
Most of us know we can deduct money we give to charities. However, what about those out-of-pocket expenses you've incurred due to charitable work, like baking cupcakes or purchasing books for auction? The costs to purchase ingredients, books or similar items can be deducted. Just be sure to save your receipts!
There are deductions for those of us who have already graduated - no matter our age. It's called the Lifetime Learning credit and, depending on income, it could take up to 20% off of the first $10,000 (credit up to $2,000) you spend for post-high school education to help improve your job skills.
Job Search. Losing a job and/or looking for work can be time-consuming and expensive (i.e. hiring a resume writer, printing resumes, driving to interviews, etc.). If you're searching for a job in your current field and your expenses exceed 2% of your gross income, costs over that 2% can be deducted.
Social Security. Self-employed people know that 15.3% of their income is for social security taxes (portions typically paid by BOTH employee and employer). However, be sure to deduct the 7.65% (employer portion) off your income taxes.
Did you refinance your home or car this year? Good news! You'll not only save money every month on your loan interest, you can also deduct any loan points you paid on the refinance. It's a win-win!
Retirement Contributions. When you contribute to a traditional individual retirement account or a workplace retirement plan, you can typically get a deduction on those contributions - based on that year's IRS rules and your MAGI (Modified Adjusted Gross Income). Check with a CPA to see how much, if any, can be deducted from your
Electronic vs. Paper Filing.
One quick note about how you file your taxes. According to the IRS, the error rate on paper filed tax returns is 10% - 21%. And the error rate on electronically filed returns? About one-half of one percent. It's apparent that electronic filing (e-filing) helps to reduce errors because when you're working on your tax return both online or on a computer, the program usually automatically checks the arithmetic and will catch any mistakes. Just another possible way to change an "ugh!" to a "yay!"
See what other myFICO members are saying about their tax deductions at the myFICO forum. And speaking of taxes... see how owning a home can help you lower yours!
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