Tax season can often be a stressful time, especially if you don’t know what to expect. Every year people pay more than they owe because they overlook tax deductions they are entitled to. But you don’t have to give the IRS more than is absolutely necessary. Take advantage of any tax write-off available to you and keep more of your money.
- Home Ownership
You can take a deduction for property taxes and mortgage interest and even reap tax benefits if you sell your home. In addition, tax breaks are available for mortgage insurance premiums, interest on home equity loans, and home improvements that are medically necessary.
- Motor Vehicle Registration
Some states tax drivers a percentage of their vehicle, which is paid as part of the yearly registration fee. If you live in such a state, you can deduct that tax as part of your property taxes so you aren't taxed twice.
- Charity Donations
Monetary donations are tax deductible if you itemize deductions. However, you can also deduct items donated such as appliances, electronics, and furniture. Items worth more than $500 must be appraised, but you can deduct the appraisal fee as well.
- Medical Expenses
If you itemize deductions, you can deduct any part of your medical expenses that exceed 10% of your adjusted gross income, or 7.5% if you are over age 65. These expenses can’t already be covered by your insurance. Deductible expenses include copayments and prescription drugs.
- Job Hunting
You may be able to write off expenses incurred as a result of job hunting, which includes expenses such as printing and mailing resumes and traveling to interviews. The position must be in the same line of work as your current career and your expenses must be more than 2% of your adjusted gross income. If you are searching for your first job and need to relocate at least 50 miles away, you may still be able deduct the moving expenses incurred.
- Energy Efficiency
Energy efficient upgrades can provide tax benefits as well. You may be able to write off the cost of installing a solar water heater or wind turbine and energy efficient doors, windows, and insulation, for example. Purchasing a hybrid or electric vehicle may qualify as well.
- Child Care Tax Credit
The child care tax credit is not a deduction, but a credit that reduces your tax liability dollar for dollar. It’s available if you need to pay for childcare while you go to work or to hire someone while you search for work.
- Earned Income Credit
The Earned Income Credit is available for low-income earners who have at least one qualifying dependent. The amount you receive varies, depending on your family size, marital status, and income.
- Caring for Relatives
If you provide more than 50% to support a relative, you can claim that person as a dependent. Your parents, grandparents, aunts, uncles, nieces, and nephews can all qualify, and you may be able to claim someone as a dependent even if that person doesn’t live with you.
- Education Expenses
If you, your spouse, or dependent are in school, you can deduct up to $4,000 for expenses such as tuition and books and up to $2,500 for student loan interest. You may also be eligible for the Lifetime Learning Credit and the American Opportunity Tax Credit.
Keep good records throughout the year and save all receipts. Doing these things can save you money at tax time, either reducing your tax liability or giving you a larger income tax refund. In addition, keeping receipts protects you in case you get audited and need to prove your expenses are legitimate.