tax deductions

7 Overlooked Deductions and Tax Breaks You Should Know About

February 19, 2021 By Tamila McDonald Leave a Comment

If your goal is to cut your tax bill, then seizing every deduction you are owed is a must. The trick is, many people miss out on tax savings simply because they weren’t aware of a tax break that’s available to them. As a result, they end up overpaying. Luckily, by learning about commonly overlooked deductions and tax breaks, you increase your odds of snagging everything you’re eligible to have. With that in mind, here are seven commonly missed deductions and tax breaks everyone should know about.

1. Childcare

If you need to pay for childcare for your kids so that you can work, you may be eligible for a childcare tax credit. Generally, the value is between 20 and 35 percent of what you had to pay for qualifying care for your kids. For households with two or more children in work-related childcare, the credit is potentially worth up to $6,000.

You may even qualify for a partial credit if you take advantage of a company-provided childcare reimbursement account. However, only any amount paid above and beyond what’s available in that account is potentially eligible for a credit.

2. Jury Pay Handed to Your Employer

Some employers pay workers their typical wages when they are on jury duty. However, in exchange for full pay, they request the employee’s jury pay.

The trick is, when you file your taxes, you have to report the jury pay as income. But if you sent that money to your employer, you can also add a deduction, offsetting the amount.

Just make sure that you have records of both the jury pay and the money being given to your employer. That way, if you need to back up your deduction claim, you’ve got everything you need.

3. Dependents Tax Credit

If you have an older child who is no longer eligible for the child tax credit but still qualifies as a dependent – such as a college student – you may be able to claim a different tax credit worth $500. The same goes for caring for a dependent adult in your home, such as an aging relative.

4. Gambling Losses

Whether you headed to a casino or decided to gamble online, any of your gambling losses could be deductible. You can only access this deduction if you’re itemizing, and it’s also limited to the amount of winnings you need to tareport as taxable income. However, by using your losses for a tax break, you can reduce your liability.

It’s also important to note that you don’t have to have casino-related losses. Bingo, raffle tickets, and lottery tickets also qualify as gambling, so those losses are potentially deductible, too.

Get all of your tax questions answered with H&R Block’s Tax Information Center!

5. Mortgage Refinancing Points

If you used points when you refinanced a mortgage, you usually have to deduct the points over the life of the loan, dividing the value based on the term of the mortgage and applying it for that number of years. Since loans can last 15 to 30 years typically, it’s easy to forget about the deduction after a few years. As a result, many taxpayers miss out on this benefit.

However, if you did a refinance to support home improvements, you might not have to wait. In some cases, you can claim the full value of the points related to the improvement in one go. Then, if there are non-improvement-related points, those get split out over the life of the loan.

6. Lifetime Learning Credit

Even if your college years are largely behind you, that doesn’t mean you can access a credit to offset ongoing education. With the Lifetime Learning Credit, you can claim up to $2,000 a year to reduce the functional cost of classes designed to boost job skills.

7. Military Reservist and National Guard Travel Expenses

If you’re a military reservist or National Guard member who has to travel 100 miles or more to attend meetings or drills, must stay overnight, and uses their own car to get there, you may be able to deduct the cost of lodging, half the cost of your meals, and tap a mileage-related reimbursement. Plus, if you have to deal with tolls or parking fees, those may be deductible, too.

Accessing this deduction does mean itemizing. However, if the value of itemizing exceeds the standard deduction, it’s worth capturing this savings.

Do you know of any other commonly overlooked deductions and tax breaks people should know about? Share your thoughts in the comments below.

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Business Credit Card Deductions You Won’t Want to Miss

January 30, 2019 By Amanda Blankenship Leave a Comment

There are more than 364 million open credit card accounts in the United States. Most people use one daily. This is typically true of businesses as well. In fact, most business owners have a credit card they use for any and all purchases. However, not everyone is aware of the many business credit card deductions they may be missing out on.

5 Business Credit Card Deductions

As many of us are receiving our W2s and other tax paperwork in the mail, you may be searching for additional deductions you can make before you file. If you are a business owner or have a business credit card, be sure you make a note of these.

Credit card interest charges. Ideally, you wouldn’t have any interest on purchases for your business. Every once in a while you may have to buy a large piece of equipment or something more expensive that you aren’t able to pay off in one swipe. If you are charged any interest throughout the year, you can deduct it from your taxes.
Any swipe fees. At any point during the year, if you paid a service fee to swipe your business credit card, deduct the fee.
Late fees. The same can be said of late fees. You can write off any late fees you paid last year.
Annual fees. Some business credit cards have an annual fee. If your card does, you can deduct the fee from your taxes.
Miscellaneous credit card fees. All in all, you’ll be able to deduct any fees or charges you paid last year using your business credit card. Be sure you note any fees you incur, so you have this information on file.

Things to Keep in Mind When You File

Keep in mind, that these deductions are only available for business credit card transactions. You cannot write off fees and interest charges for any personal items. If you use your business card for anything personal, you’ll need to go through your statement and calculate the amount of interest paid on business dealings. However, it is best to use the card solely for business purchases to make tax season a little easier.

Lastly, if you have any questions about business credit card deductions or other deductions available to you, it never hurts to consult a tax professional. At this time of year, many firms are running specials and can help answer any questions you may have.

What is one of your favorite business or personal tax deductions?

Return to the True Meaning of the Season – Get In on Giving Tuesday

November 23, 2018 By Jennifer Clark 1 Comment

Giving Tuesday is a way to de-emphasize some of the commercialism of the holiday season, by remembering what the holidays are really about – not Black Friday riots or Cyber Monday deals. But, instead, giving to the less fortunate, fostering goodwill toward all, and helping your fellow man. So, what is Giving Tuesday? Here’s a brief explanation and some Giving Tuesday ideas to get you started.

What Is Giving Tuesday?

Giving Tuesday was started in 2012 as a way to counter the consumerism encouraged by Black Friday, Small Business Saturday, and Cyber Monday sales. Founding organizations included the United Nations Foundation, the 92^nd Street Y, Skype, Mashable, Phoenix House, Starwood Hotels, Microsoft, Case Foundation, Aldo, Sony, Cisco, and Heifer International.

Giving Tuesday falls on the Tuesday after Thanksgiving, and represents an international day of giving that allows nonprofits, charities, and causes to push for a big boost to year-end fundraising. The intention is to create a new, unselfish habit of donating to charitable causes at the end of the year. In just a few years, Giving Tuesday has exploded in popularity, generating $274 million in donations in 2017. This year, it’s sure to be even bigger, and your organization shouldn’t miss out.

Giving Tuesday Ideas

Your organization can join the fun at GivingTuesday.org. Most organizations take to social media to promote their Giving Tuesday campaigns using the hashtag #GivingTuesday. Designate a point person within your organization who can round up volunteers from your network, spearhead the fundraising efforts, and collate the results with lessons for next year. Then get creative with some of these ideas to make the most of your 24-hour fundraising drive:

Ask each person who donates to tag five friends and ask them to donate. People are more likely to respond to a personal appeal from someone they know and trust – that’s why the Ice Bucket Challenge was so successful. Amplify your fundraising power by asking each donor to challenge specific friends to participate, too.
Start your campaign early. With Black Friday sales starting earlier and earlier on Thanksgiving Day, it’s fair to start your Giving Tuesday event on Monday night.
Promote the event on social media. Don’t be afraid to use hashtag power to get the word out. Use a platform like Hootsuite to schedule posts. Use YouTube or Facebook Live to run a traditional telethon event, announcing new donations and interacting with donors. Make things exciting – put your CEO in a dunk tank, show a progress meter, or hang donor’s names on a wall of giving.
Encourage supporters to use the hashtag #Unselfie to identify them on social media. If you’re having a brick-and-mortar event, use temporary tattoos with your logo, or some other identifying mark that supporters can photograph and post on social media.
Match gifts. Offer to match gifts given within the 24-hour timeframe to incentivize donations.
Collaborate with other organizations. Find out what other organizations or local businesses you can collaborate with to promote your Giving Tuesday event. Perhaps a local business can help you match donations, or contribute prizes to give away to lucky donors.
Perform challenges. Your staff can celebrate campaign milestones by performing challenges, such as posting a silly video of employees singing and dancing, jumping into a frozen lake, or getting an interesting haircut.
Ask supporters to donate the price of a morning coffee. Lots of people buy a coffee on the way to work. Ask supporters to donate the price of their drink, and when they get to your fundraising page, use price anchoring to encourage a larger donation.
Make Giving Tuesday a regular affair. Now that Giving Tuesday is becoming more established, many organizations are extending the holiday into First Tuesday, a monthly day of giving. Encourage donors to commit to a regular, monthly donation.

Giving Tuesday gives charitable and nonprofit organizations a chance to ramp up year-end fundraising numbers. It’s the perfect time to celebrate an international day focused on giving to your favorite causes and organizations. Don’t miss out on the fun! Last year, supporters gave $274 million, and they’re sure to give even more this year.

Is your organization ready to rake in some year-end donation dollars? Who will you be donating to this year? Share your thoughts with us in the comments below.

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Fall: The Season to Donate

October 20, 2017 By Jacob Sensiba Leave a Comment

The season of fall brings around new colors and new weather. It also precludes the season of winter, as well as a few significant holidays. During this time of year, we often reflect on the things that we have and the people in our lives. When thinking about what we are thankful for, we often think about people who are not as fortunate as ourselves. A great way to help those people is to donate. Donating can come in many forms, including time, money, and things. Below are some ways you can donate this season.

Hurricane/Wildfire Relief

With the four hurricanes that hit our southern border and the wildfires ravaging the west, the victims of these natural disasters should be first that come to mind when donating. Easy and useful donations include toilet paper, diapers, items for hygiene, and non-perishable goods (e.g. canned food). Go to FEMA to find out specifics as to what they do and don’t except.

Blood

In addition to all of the natural disasters our country experienced these last couple of months, we also had the worst mass shooting in our nation’s history. Donating blood is a great way to help the victims of this horrendous act, as well as those injured by the hurricanes and wildfires. Go to American Red Cross to find out how and where you can donate.

Halloween Costumes

With Halloween around the corner, local Children’s Hospitals are filled with children who will not be able to celebrate the holiday like the rest of the kids. Being able to dress up in a costume and participate in the holiday will help them have fun while they are recovering in the hospital.

Time and Food for Thanksgiving

Thanksgiving is also right around the corner. Though many of us will be fortunate enough to sit down with family and friends to enjoy a nice meal, there are also many of us who aren’t so lucky. Take time this Thanksgiving to volunteer at your local food pantry or your local chapter of Feeding America. If you don’t have time, they could always use more food. Check out Feeding America for more information.

Toys

What follows Thanksgiving is a wonderful time of giving. During the December holidays, those lucky enough will gather with family and friends to celebrate togetherness and exchange gifts. Your local children’s hospital, as well as local orphanages and foster homes, are a great place to donate toys. You can also check with Toys for Tots for more details on donating.

Winter Gear

Depending on where you live, this section may not apply. However, those that live in parts of the world where it gets cold for winter, donating coats, hats, and gloves can be a great way to help those in need make it through the cold months. Also, if you live in a city where homelessness is more prevalent, tie scarves, gloves, and coats to corner light posts. This is also a good way to help those make it through winter, who cannot do so on their own.

Money

There are many non-profit and religious organizations, like the ones above, that do so much for their community and for people in need. Doing so comes at a cost, so donating some money to help them continue their mission is a great way to help. An incentive, though you shouldn’t need one, is most monetary donations are tax deductible.

Conclusion

This fall and holiday season, do what you can to help those that are less fortunate. Donate resources for those effected natural disasters and blood for victims of the massacre in Las Vegas. You can also donate food, time, and money to help people and organizations that aid those in need every day. This season, do your part to provide a bright light for those in a dark place.

Photo: WP Kube

Take Advantage of This Once-A-Year Tax Break

November 18, 2016 By Amanda Blankenship 1 Comment

Fall is here, which means that it is time for the annual running of the workplace benefits gantlet. In all the rush to pick healthcare plans and sort out this HMO from that HSA, do not let your FSA get lost in the alphabet soup of offerings. That is a Flexible Spending Account, and it is a terrific – but often overlooked – tax break for anyone with regular medical expenses, from co-pays to eyeglasses.

A flexible spending account allows you to save up to $2,500 per person each year, before taxes. You set an annual total, and part of that money is deducted each week from your paycheck. As you go through the year and spend money on qualified medical expenses – which are everything from crutches to pregnancy tests – you file for reimbursement.

The savings come in the form of a tax break – none of the money you deposit in a flex account is taxable, so you are saving the equivalent of your marginal tax rate on both your federal and state taxes. For someone living in California, with household income at the U.S. median of $50,000 a year, a $2,000 flex account would cut more than $800 off your taxes, but your $38 weekly deposit would shrink your paycheck by less than $23.

There is one drawback to a flex account – the “use it or lose it” provision. Any money unspent in the account by the end of the year goes to pay the plan expenses and shortfalls. Fortunately, your benefits year can be longer than 12 months. The IRS allows plans to offer a grace period running up to March 15 as the spending cutoff, giving you 15 months to incur expenses. And, in 2014, the IRS also introduced a carryover option that allows each account to retain up to $500 of unspent flex money for the next year.

Another little-know benefit of flex accounts is that they are not pay as you go. If you have a $500 dental bill early in the year, but only $300 in your flex account, most plans will reimburse the full $500. If you quit the next day, ending your contributions to the plan, the shortfall is covered by the money left unspent in other workers’ accounts.

However, if you leave your job with unspent money in a flex account, you do not get a refund. You may have a grace period to use that money by the end of the month or pay period, but that is it. Some plans also allow you to continue your account under the COBRA laws that can extend your employer health benefits.

To figure out if a flex account will work for you – and how much to contribute – review your ongoing and expected medical costs. If you are regularly buying contact lenses, getting prescriptions or other repeated expenses, it is easy to predict your needs. Otherwise, start with enough to cover your basic medical needs from the previous year.

Besides the tax savings, a flex account can help you budget for medical costs, since the money is automatically deducted from your paycheck. A flex account also can act as a savings account, similar to how some people use tax refunds. In that case, you contribute to the account, save your receipts, but do not file for any reimbursement until you can claim a large sum that pays for holiday gifts, a vacation or other big-ticket expense.

If you do leave too much money in a flex account, use it up by scheduling an appointment with a dentist, eye doctor or even acupuncturist right away. There is always a big end-of-the year rush as thousands of other flex savers do the same thing.

This article was provided by our partners at moneytips.com.

Photo: 401(K) 2012

Strange Tax Deductions

April 11, 2016 By Jennifer Clark 1 Comment

Taxes can be tricky, but did you know they can also be quite strange?

Every year, we file our typical W2’s, 1099’s and other tax forms to please the IRS. If you follow SavingAdvice, you might be aware of some of these write-offs. But, the next time you go to file, you might want to also keep these strange tax deductions in mind:

Your gym membership. Sure, exercise is rewarding on its own, but did you know it can also be tax deductible? If your doctor is recommending exercise for your health, you could have a write-off on your hands. Additional write-offs could include any costs used to help improve your cholesterol, weight and the like. Just make sure your doctor is signing off on it.
Your swimming pool. Swimming pools are nice, but they are also a daunting expense with upkeep and maintenance and, sometimes, repairs. However, if you have a medical condition with which a swimming regimen helps to improve, such as arthritis, your pool expenses may count as a deductible medical expense.
Moving with your pets. You may already be aware of moving fees counting toward a write-off on your taxes if it is for a new job, but relocating with your pets qualifies too. Bills that may accumulate from moving to your new home with pets can count toward this deduction.
Music lessons. Music lessons, specifically clarinet lessons, can be a write-off due to this 1962 case, mentioned on page 89 of this file, when an orthodontist argued that playing the clarinet could help with a child’s overbite and would, thus, be considered a medical expense.
Butting out. The perks of quitting smoking go beyond improving your health. The IRS may permit the deductions of any smoking cessation programs, patches or aids that you use to kick this habit.
Temporarily renting your space. If you rent your home out to guests for less than 15 days per calendar year, the related income from such an exchange would be tax-free. So, if you live in a prime destination spot or have been exploring the idea of signing up for airbnb, this one’s for you.
Clowning around. Parading around with giant shoes and a red nose just became a little more enticing. If you chose the clown life, your costume and gear for such a position is tax deductible. Why? It’s not an outfit that is usable outside of a clown gig.
Childcare during charity work. While not necessarily a traditionally “strange” deduction, if you are involved in charity work but need childcare during hours serviced, you can deduct the costs from you 1040.
Pets. Yes, that’s right; overhead of care for your “furbaby” may be considered a write-off if the animal is used for business.
Sex-change operations. If it can be deemed medically necessary, such as a gender-identity disorder, you may be able to deduct a large portion of expenses toward the procedure, such as hormone therapy and sexual reassignment surgeries. However, breast augmentations, in this case, are not due to being considered a cosmetic surgery.

The lesson here? Some cases are more specific than others, but a rule of thumb to follow is if the expense can be proved medically necessary or business-related, you may want to look into what tax deductions are available for such costs.

Have you been able to take advantage of any of these strange write-offs?