It is easy to miss the tax breaks you have a right to when you are in a rush to meet the filing deadline; however, before you run to your accountant’s office, you should review these 5 tax deductions you probably did not know about:
- State sales tax. Depending on the state in which you reside, you can choose to deduct your state and local sales taxes over the state income tax; however, you may only pick one, and the list must be itemized when filing. If you live in a state with higher income tax rates, you will be better off choosing to skip filing your sales tax deductions. There are limitations, though, such as amount allotted for the discount and a higher salary.
- Charitable gifts and donations. Providing monetary donations to non profits and causes throughout the year do count as subtractions on your records. You might remember to note this with your accountant, but make sure to also note any supplies you purchased or contributed toward a group. These count as itemized charitable donations. While the time you spend cannot be accounted for from your fees, you can deduct 14 cents to the mile for any time spent driving as well as costs for cleaning any uniforms and the like.
- Moving expenses and job hunting. You may be aware that certain expenses accrued from relocating for a new job can be considered a tax write-off, but it does not stop there. We have good news for you recent college graduates: Your first position is permitted by the IRS to be written off if your first job is an exceptional distance (more than 50 miles) from where you currently live including parking fees and tolls. Additionally, those with existing jobs can deduct costs associated with searching for a new occupation as long as you itemize. As with anything, there are some restrictions along with key notes to keep in mind. You can learn about those here.
- Retirement tax savings. If you have been holding off on investing funds into a retirement fund, you may want to start now. In an effort to encourage low-income and moderate tax payers to save money, the retirement savings contribution credit (otherwise known as the saver’s credit) was put into place. Individuals may receive up to 50% in tax savings for the first $2,000 placed into a retirement account, whether individual or through your workplace.
- Certain medical expenses. For most taxpayers with many medical expenses, including travel costs to and from appointments and the like, these itemized charges must exceed 7.5 percent of your adjusted gross income in order to be deducted. It can be difficult to reach this threshold even when you include the premium you pay on your insurance. However, if you are self-employed and pay for your own insurance plan, you are granted to dock 100 percent of your premium cost off your gross income.
These are just a few of the deductions you may not have known about. Others include tuition and higher education fees for yourself, spouse or dependent; child care credit; and refinancing mortgage points. Be sure to speak with your accountant about all of the above and any others for which you may qualify.
If you’ve already filed for this year, make it a goal to start tracking more deduction opportunities for the remainder of 2016.