In this economy, people devote a lot of energy looking for ways to spend less and get more. One area many people ignore is how to save money on their taxes. You may have already done your part, now you just need to know about the deduction. Here are some frequently overlooked deductions for expenses you may have had this year, and now it’s time to save once you know about them.
State Sales Tax
If you live in a state that has no income tax, you have the opportunity to deduct the state sales tax you’ve paid. Everyone has the option to deduct either their state sales tax or income tax from federal returns. They can choose which one saves them more money. There are restrictions as to how much sales tax you can deduct, but if you purchased a big-ticket item last year, you can add that amount, too.
Charitable Deductions
Most people know that if they donate something to a thrift store they can take a deduction. But did you know that you can deduct the cost of that can of cream of mushroom soup you used to make a casserole for the homeless shelter’s Thanksgiving meal? You can deduct out-of-pocket expenses while doing volunteer work. If you bought stamps for a mailing, printer paper for a project, or brought coffee to volunteers cleaning a park, you can deduct it. You’ll need proof from the organization if you spent more than $250. You can also deduct mileage and parking if you used your car for the group.
Education Loan Interest Payments
If you are no longer a dependent of your parents and they have paid back a student loan for you, you can deduct up to $2,500 of the interest paid. This is looked at by the IRS as a gift made to you by your parents to pay off the student debt. Unfortunately, Mom and Dad can’t deduct any of it from their taxes.
Job Search Costs
Many people are still looking for work and if you are one of them, keep track of your expenses. If you were looking for work in the same skill area, and your total expenses were more than two percent of your adjusted gross income, you can deduct the additional expenses. You can’t deduct expenses searching for your first job, or a job in a different area. The deductions include items such as transportation costs, food and lodging if you had to travel away from home, and employment agency fees. These deductions are available even if you didn’t get a new job.
College Credit
If your job hunt caused you to go back to school to update or add to your skills, there is a deduction for that. The Lifetime Learning credit lets you take up to $2,000 a year for courses you took to improve your job skills. The max is based on 20 percent of up to $10,000 you spent on your education. Vocational school and community college courses count toward the deduction. There is an income requirement that differs between filing jointly and individually.
Airline Baggage Fees
This is one for the frequent business traveler who is tired of being nickeled-and-dimed by the airlines. If you are self-employed and travel on business, then you can deduct those annoying airline baggage and ticket change fees.
There are many more deductions that people overlook. It can pay to have a professional service prepare your taxes so you can get the most from your deductions. Don’t leave money on the table this year. Find all of those deductions and make it an annual event to see how much you can save on your taxes.
Sources: http://www.kiplinger.com/slideshow/taxes/T054-S001-the-most-overlooked-tax-deductions-slide-show/
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