Eight Tax Deductions to Watch Out for When Filing This Year
Take advantage of every tax deduction to which you are entitled, because taxes are the biggest expense for most people . Requiring no deductions is just leaving money on the table. Before you apply, make sure you don’t overlook these loans and deductions, which can save you hundreds if not thousands of dollars.
Government sales taxes
If you list your deductions, you can claim paid you in the past year state income tax and local sales taxes or paid by your state taxes and local sales taxes. If you made a big purchase last year – like a car, an expensive wedding ring, or an expensive office chair – a sales tax deduction might make more sense. The bank rate , however, states that if your sales taxes are your only deductible expense , you’re better off taking the standard deduction than listing. Need help deciding what to do? The IRS has a calculator to help you calculate your potential sales tax deduction .
Mortgage refinancing points
The points you paid to lower your mortgage interest rate are not tax deductible, but the IRS treats points differently if you refinance than if you just bought your home. When purchasing, you can fully deduct points in the year in which you closed the loan. However, for refinancing, the deduction must be evenly distributed over the entire length of the loan. So, for example, if you refinance a 30-year mortgage and paid $ 3,600 in points, you can only deduct $ 120 per year. When it’s allocated in this way, it’s easy to forget to count that share of the points each year as your taxes. But hey, every little thing matters. Here is the IRS information on mortgage items .
IRS Savings Credit
If you donate to a 401 (k) or Roth IRA, the IRS may pay you to do so. A funded loan is essentially government reimbursement for a portion of your pension contributions, as is the case with employer 401 (k) . Your income must be between $ 30,500 and $ 61,000 (depending on your filing status) and there are other special rules , but this is free money if you qualify. And unlike deductions, which only cut a portion of your tax bill, tax breaks cut your taxes in dollars per dollar — they are much more valuable. Also good news: you can contribute to (or open) the IRA by April 15th for this loan .
Charitable gifts and volunteer miles
You already know you can deduct your cash and non-cash charitable donations, but are you sure you are keeping track of all your charitable spending? Your out-of-pocket expenses related to your donation can save you money in taxes. For example, if you baked cupcakes or brownies for a fundraiser, the cost of those baking ingredients could be deducted, according to CNBC and CPA Lisa Green-Lewis . As with all tax deductions, just keep your receipts. If you volunteer with a charity, you can deduct your mileage at 14 cents per mile if you keep a mileage log. And you can even deduct the cost of a nanny to babysit your children while you volunteer, although that may be more of a gray area.
Child and Dependent Care Loan
In terms of childcare, the IRS will give you a loan of up to $ 3,000 for one child, or $ 6,000 for two or more children when you pay for childcare while you work. However, some employers offer a childcare reimbursement bill that can be paid in pre-tax dollars up to $ 5,000, which is likely to be better than an IRS loan, depending on your tax category. You are not allowed to double dive. However, Kiplinger offers a little advice :
Planned expenses also cannot be used for a tax credit. But get this: While only $ 5,000 of expenses can be paid through a tax-deductible account, up to $ 6,000 for caring for two or more children may be eligible for credit. So if you’re making the most of the plan at work but spending even more on work-related child care, you can request a loan for up to $ 1,000 in additional costs. This will cut your tax bill by at least $ 200.
Childcare is a huge expense for many parents, but the tax credit relieves some of that burden.
Higher education costs
If you or one of your dependents paid for a college degree – undergraduate, graduate, or continuing education – you may qualify for a lifetime student loan, up to $ 2,000 per tax return. And there is no limit to the number of years you can apply for a loan – stay in school forever! There are income restrictions and some requirements, so see the details below . In the IRS leadership . Another loan you can apply for is the American Opportunity Credit up to $ 2,500 to cover the cost of a qualified education. However, you can only use the Lifetime Study Loan or America Opportunity Loan for each qualifying student. American Opportunity Credit has a higher cap, but can only be claimed for 4 tax years and the student must be enrolled at least part-time to earn a degree. See the IRS manual for more information .
Energy Saving Home Improvements
This is one of the categories of tax credits that I always forget about, because there is usually a very long time between home renovations and April 15th, and the list of qualifying improvements for this tax credit changes frequently. But you can get credit for energy efficient upgrades like 30% of the cost of installing solar panels (expiring this year, so hurry up!) Or up to $ 200 for Energy Star certified windows, doors, or skylights. Check out this list of federal tax credits you can get this year for improving your energy efficient home . The Tax Credit List can also help you plan home improvement and energy conservation projects for this year.
Military tax credits
Finally, while there is no specific tax deduction for military personnel, there are a number of military-only tax incentives . For example, if you served in a war zone last year, you can exclude all income earned in the month (s) in which you served in the zone. If you were on the reserve, you can also deduct unreimbursed travel expenses if you had to travel more than 100 miles from home due to military service. Unlike ordinary people, military personnel can receive this deduction as an “over the line” deduction, instead of having to make a list and meet a certain threshold. (But if you are not in the military and have moved to work, see if you can deduct the travel costs . These can include travel costs, boxes, shipping, and more.) See Motley Fool to find out about other tax breaks for the military. …