Commonly Overlooked Tax Deductions & Credits

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Commonly Overlooked Tax Deductions & Credits By: John J. Bowman, Jr.

Transcript of Commonly Overlooked Tax Deductions & Credits

Page 1: Commonly Overlooked Tax Deductions & Credits

Commonly Overlooked Tax Deductions &

CreditsBy: John J. Bowman, Jr.

Page 2: Commonly Overlooked Tax Deductions & Credits

Job-Hunting Costs• If you spend time this year looking for a job (not your

first job) then many of the expenses incurred while job-hunting can be deducted, including:

• Transportation expenses: 56 cents a mile for driving plus parking and tolls as well as cab fares

• Food and lodging expenses• Employment agency fees• Cost of printing resumes, business cards, postage, and

advertising

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New Job? Moving Expensive• To qualify for a moving expense deduction you must have

moved at least 50 miles away from your old home. • You can deduct the cost of moving yourself and your

household goods to the new location. Some of the eligible deductions include:

• 23.5 cents per mile while driving your own car• Parking and tolls• Lodging

• You are eligible for this deduction even if you do not itemize.

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Sales Taxes• You have the option to deduct sales taxes or state

taxes off your federal income tax. • The sales tax deduction is especially important if you

live in a state that does not impose a state income tax.

• However, even if you pay state taxes, the sales tax break may be the better deal if you made larger purchases such as a engagement ring or car.

• This will require doing an itemized deduction.

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Child-Care• You are eligible for a tax credit worth between 20%

and 35% of what you pay for child care while you work. A tax credit is even better than a deduction!

• It is also legal to list the cost of a babysitter as a charitable contribution on your tax return, if you can document that you were volunteering while the babysitter was performing their duties.

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Energy-Saving Home Improvements

• If you install qualified residential alternative energy equipment you are eligible for a credit of up to 30% of the total cost of such systems installed through 2016.

• This can include things such as a solar hot water heater, geothermal heat pump, and wind turbines.

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Lifetime Learning Credit• The Lifetime Learning credit can provide up to

$2,000 per year• You are eligible to take off 20% of the first $10,000

you spend for education after high school in an effort to give yourself new or improved skills.

• While this deduction phases out at higher income levels, it does not discriminate based on ones age.

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Health Insurance Premiums• In some cases, insurance premiums from medical

expenses can be deducted from your taxes.• Medical expenses usually need to exceed 7.5% of your

adjusted gross income in order to be deducted.• However, if you are self-employed and responsible for

your own health insurance cover then you can actually deduct 100% of your premium cost.

• This will be taken off your adjusted gross income as opposed to an itemized deduction.

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Self-employed Social Security

• If you are self-employed and forced to pay the full 15.4% Social Security tax on your own, then you can write off half of what you pay.

• This deduction can be found on the face of the 1040 form, therefore, you do not need to itemize to take advantage of this deduction.

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Out-of-Pocket Charitable Deductions

• You can write off out-of-pocket expenses incurred while doing charity work.

• If you make food for a soup kitchen or fundraiser, you can deduct the cost of ingredients used to make the food.

• It is important to save the receipts or itemize the costs in case you are audited.