Top 10 Overlooked Tax Deductions
It’s getting close to that April 15th tax deadline again, so it’s the perfect time to go over 10 of the most overlooked tax deductions to help you get the money you have earned back from Uncle Sam!
If you’re expecting a refund, shame on you that it’s April and you haven’t gotten your money back yet! Otherwise, don’t feel bad that you’re coming down to the wire - you’ll just be one of the millions of Americans doing your taxes while watching the Final Four this weekend.
- Loss of Property From a Natural Disaster – If you have lost anything in one of the many natural disasters we’ve seen over the past year, you can deduct either the price paid for the property plus any improvements, or the property’s decline in market value, determined by repair costs. (H&R Block)
- Home Office Deductions – Do you run a business out of your home? If so, you may be eligible for a tax deduction on any area of your house that you use solely for business purposes. (H&R Block)
- College Tuition – You can deduct up to $4,000 in tuition expenses for yourself, your spouse or your dependents. This is even more useful if your income is too high to qualify for the Hope Credit or Lifetime Learning Credit.
- Points on a Home Loan Refinance – Did you refinance your home loan this year and pay points on the transaction? You should be able to deduct that full amount. (Kiplinger)
- Energy Credits – One of the best things about making your home more energy efficient is that in a lot of cases, the government will foot part of the bill! The credits include 10% of the cost of skylights, outside doors, windows, pigmented roofs and high-efficiency furnaces, water heaters and central air conditioners installed this year in a primary home. The maximum credit is $500, and no more than $200 can be attributable to windows, and no more than $150 claimed for furnaces and water heaters.
- IRA Withdrawls for First Time Homebuyers – Although we almost never advocate withdrawing from a retirement account because of the dire effects it can have later in life, the IRS allows you to withdraw up to $10,000 from an IRA before 59 ½ in order to make a down payment on a new house.
- State Sales Taxes - Although all taxpayers have a shot at this write-off, it makes sense primarily for those who live in states that do not impose an income tax. You must choose between deducting state income taxes or state sales taxes. For most citizens of income-tax states, the income-tax deduction is a better deal. IRS has tables for residents of states with sales taxes showing how much they can deduct. But the tables aren’t the last word. If you purchased a vehicle, boat or airplane, you get to add the state sales tax you paid to the amount shown in IRS tables for your state, to the extent the sales tax rate you paid doesn’t exceed the state’s general sales tax rate. The same goes for home building materials you purchased. These items are easy to overlook. The IRS even has a calculator on its Web site to help you figure the deduction, which varies by your state and income level. (Yahoo! Finance)
- Self-Employed Health Insurance – If you don’t work for the man from 8-5 and pay for your own health insurance, you may be able to deduct up to 100% of your health insurance premiums! (IRS)
- Accounting Fees and Tax Preparation Software – Did you pay for someone else to do your taxes? You can deduct that from your taxes (or tell them to!). If you’re like me and am taking the easy route using TurboTax, you can deduct the cost of the software.
- Clean Fuel Credit - Credits are good because they are a dollar-for-dollar reduction in tax. And if you bought a new hybrid gas-electric auto or truck in 2007, you can get a conservation tax credit of between $250 and $1,000 and an additional fuel economy credit of between $400 and $2,400, depending on the make and the fuel economy. A hybrid car combines an electric motor with a gas fueled internal combustion engine. But act quickly. The credit starts to phase out when the auto manufacturer sells its 60,000th hybrid vehicle. That’s the total per manufacturer, not 60,000 per model. Once the cap is reached, the phaseout starts at the beginning of the second subsequent calendar quarter. (MSN)
Several of the citation links after the tips will link you to other lists that you may find useful also. Best of luck in the tax season!
