Nine things you didn’t know you could deduct from your taxes
Paying taxes is always painful, but more painful is realizing that you forgot to include a deduction that could have helped you reduce your tax bill or increase your tax refund on your return.
Information is power, and most of the time, due to ignorance, we make mistakes that, in the end, cost us money. So, so that you are not uninformed and don’t miss anything on your next tax return, please review this list of 9 things you didn’t know you could deduct from your taxes.
You can deduct sales or state income tax from your federal income tax. This can be a big money saver in a state that does not have its income tax. Even if you paid state income tax, the sales tax exemption might be a better deal if you made a significant purchase, such as an engagement ring or a car. You have to itemize to take the deduction instead of taking the standard deduction.
Health insurance premiums
Medical expenses can wreck any budget, and the IRS is sympathetic to the cost of insurance premiums, at least in some cases. Deductible medical expenses must exceed 7.5% of your adjusted gross income (AGI) to be claimed as an itemized deduction by 2022. However, if you are self-employed and responsible for your health insurance coverage, you can deduct 100% of your premium cost. That is deducted from your adjusted gross income rather than as an itemized deduction.
Tax savings for teachers
If you are a teacher, you know that sometimes you must dig deep into your pocket to purchase a necessary item for the classroom. The IRS appreciates this generosity and allows qualified K-12 educators to deduct up to $300 for supplies.
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Most taxpayers know they can deduct money or property donated to charity, but are you taking full advantage of this benefit? Out-of-pocket expenses for charity also qualify. For example, if you make cupcakes for a charity fundraiser, you can deduct the cost of the ingredients you used to bake them. It helps to keep receipts or itemize expenses in case of an audit.
Paying the babysitter
You can receive a tax credit for part of the cost of a babysitter if you pay the babysitter to watch the children while you work, look for work, or are a full-time student. You must report the name and tax identification number of the person or organization providing the care and the address where the care was provided. Some states also require you to report the care provider’s phone number. This credit may be even better than a deduction because you don’t have to itemize yours.
Studies and academic preparation
The tax code offers some deductions aimed at college students, but those who have already graduated still need to get a tax break, too. The Lifetime Learning credit can provide up to $2,000 per year, discounted 20% of the first $10,000 you spend on education after high school to further your education. This is phased out at higher income levels but does not discriminate based on age.
Unusual business expenses
Expenses that benefit your business and might have unusual purposes may be deducted if fully documented; for example, an auto shop owner might deduct the cost of cat food that invites stray cats to stay and keep mice away.
Looking for work
Losing your job can be traumatic, and the cost of finding a new one can be high. But, for tax years before 2018, if you are looking for a job in the same field, itemize your deductions, and these expenses are more than 2% of your adjusted gross income, all eligible costs above that threshold can be deducted. It may seem like a high bar, but those costs add up quickly; Consider removing the mileage you earn on your car driving to interviews and the cost of printing resumes. As of 2018, these expenses are no longer federal tax deductible, but some states, such as California, still allow this deduction after 2018.
Social Security for the Self-Employed
The bad news about self-employment: You must pay 15.3% of your income in Social Security and Medicare taxes, the portions usually paid by both the employee and the employer. But one small consolation: You can deduct the employer’s share of 7.65% from your income taxes.