12 often overlooked tax breaks

The April filing deadline (it’s on the 18th this year) is less than a month away. So far, the tax season is running slow. The Internal Revenue Service says that fewer than half of the expected 153 million returns have arrived at its processing offices.

That indicates that there will be a mad rush to the tax filing finale.

That means that a lot of people will fall into the proverbial haste makes waste pit, being in such a hurry that they’ll overlook some tax breaks.

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If you’re careful not to miss any tax breaks for which you qualify, you could save enough on your taxes to pay for a trip to Skyline Overlook on St. Thomas in the U.S. Virgin Islands.

Here are a dozen tax credits, deductions and income adjustments that are regularly neglected by filers. Granted, some can be claimed only if you itemize and most people don’t. And, yes, some are pretty esoteric, applying to a relative handful of filers.

But some might fit your personal tax situation. So take a quick look and see if they apply to your taxes.

1. Charitable donations other than cash: It’s always handy to write a check or use your credit card or even text a few dollars to a worthwhile charity. Then you jot those dollar amounts down on your Schedule A to deduct from your taxes. But your other donations count, too. This includes the value of the clothing and household goods you gave to your church’s thrift shop, as well as your out-of-pocket expenses and even mileage in connection with your volunteer efforts. And don’t forget about that jalopy you donated.

2. Moving expenses: Americans are a mobile society and when we move for work reasons, many of the costs can be written off on our taxes. Even better, you don’t have to itemize. Your eligible relocation expenses are an above-the-line deduction on page 1 of Form 1040. 

3. Job-hunting costs: Costs associated with a job search in your current career field are deductible. This includes things like fees for preparing your resume and then sending it to prospective employers, as well as employment or outplacement agency fees. These are counted as itemized miscellaneous expenses on Schedule A. 

4. Costs of caring for others: Parents are well aware of the costs of child care. They also usually know they can claim a tax credit to cover some of those costs. But if you pay someone to care for another dependent while you go to work, those expenses count toward this tax break, too.

5. Interest on your RV or boat: Interest paid your main home’s mortgage is one the most beloved tax deductions, at least for the real estate industry, homeowners and their members of Congress. But a home isn’t limited to a typical house. As long as your place has sleeping, cooking and toilet facilities, the Internal Revenue Service says it counts for this deduction. This means a recreational vehicle or some boats qualify. And you also can the interest on your unconventional home even if you don’t live in it year-round. Tax law allows you to deduct interest on mortgages for up to two dwellings, your primary residence and a second home. That includes second homes on wheels or in the water.

6. Property taxes paid on all your homes: Unlike the mortgage interest deduction that’s limited to two residences, the property tax deduction is unlimited. If you own three, four or more homes, you can deduct the real estate taxes you pay on every single one of the properties.

7. State and local sales taxes: This itemized tax deduction was added to even out the itemizing options for folks who live in one of the seven states — Alaska, Florida, Nevada, South Dakota, Washington, Wyoming and here in Texas — that don’t have any kind of income tax. But even if you do pay an income tax, if your state rate is low or your income was minimal, you might find you do better claiming the sales taxes instead. This could be especially true if you bought an expensive and sales-taxable major item, like a new car. Be careful, though. You must make a choice: claim the state and local income tax you paid last year or the state and local sales taxes. You can’t mix and match them.

8. Retirement tax savings: Most folks already know that in certain cases, contributions to traditional IRAs (which can be made up to the filing deadline; again, April 18 this year) are tax deductible. But some folks also qualify for the Retirement Savers’ Credit. This could cut $1,000 off your tax bill if you put money into a traditional or Roth IRA or contributed to your workplace retirement account. This credit phases out if you make too much money, but if you’ve been saving for your post-work years, check it out to see if you qualify.

9. Educational expenses: Uncle Sam is generous when it comes to helping fund higher education. There are the above-the-like deductions for student loan interest and college tuition and fees you paid. On the tax credit side, there’s the popular American Opportunity Tax Credit, which offers a dollar-for-dollar reduction of the tax you owe; that could be up to $2,500 and possibly even more for some filers as a tax refund. Folks who’ve long been out of the traditional classroom, however, tend to overlook the Lifetime Learning Credit. This tax break provide students of all ages, including those who are done with full-time schooling but are taking take courses to help them get ahead at their jobs, a tax credit up to $2,000.

10. Gambling losses: Lady Luck wasn’t so good to you on your last visit to Vegas, baby. Sorry. But if you have other gambling winnings, say that big office pool during March Madness (yes, it’s taxable income), you can offset your gambling winnings with your losses. You’ll have to file Schedule A. And you’ll need good records of your winning and losing bets. But it can be worth it when it zeros out your gambling income.

11. Hobby expenses: These costs are a cousin of the gambling expenses write-off. If your hobby is something other than gambling, you can deduct some ordinary expenses you incur in engaging in your favorite pastime when it also brings in a few dollars. Remember, this is something you do for fun, such as photography; not an activity engaged in for profit, aka a job. But when your friends and neighbors hand over a few bucks for those great shots of their kids’ birthday parties or wedding receptions, you can offset those earnings (which you’re supposed to report on Line 21 of Form 1040) with your hobby expenses, which you claim on Schedule A.

12. Health Savings Account: The ever-increasing cost of health insurance has prompted many folks to opt for a high-deductible health plan. And to cover those deductibles, they’ve set up Health Savings Accounts (HSAs). When your HSA is through work, you put money into the account before any taxes are taxes are taken out of your paycheck. If you set up an HSA on your own at a bank or other financial institution, you make the contributions directly, then claim a deduction for those after-tax dollars (without having to itemize!) when you file your taxes. You complete Form 8889 and claim an above-the-line deduction on Form 1040.

Again, some — OK, a lot — of these deductions, income adjustments and tax credits obviously apply to special filing situations. But that might be your personal tax circumstance.

So check them out. If even just one works for you, be sure to claim it. Every tax breaks helps to get your tax bill as low as possible.

You also might find these items of interest:



Source: http://feedproxy.google.com/~r/DontMessWithTaxes/~3/i95qI9kRbGM/12-often-overlooked-tax-breaks.html

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