Stores are starting to get 2016 tax software in stock, which means that Tax Day is just around the corner. Though we’re only in January, April 18 will be here before you know it. If you plan to do your own taxes, you’ll want to know what expenses you can deduct. After all, we all want the biggest refund possible.
Tax Deductions
Your deductions will vary from others, since every situation is different. Therefore, it’s important to think about big changes you made last year, like going to college, having a baby or moving, and see how those events can affect your taxes. Even if you think you’ve deducted everything, there’s probably still something you missed.
- Sales taxes. You may not know that instead of state taxes, you can deduct state and local sales taxes. This can help you save big if your state doesn’t have income tax. You’ll have to itemize your deductions in order to get this deduction, but if you spent a lot of money on a car or jewelry, then it may be worth it.
- Mortgage interest. A mortgage is expensive, but the good news is that you can deduct the interest you paid on it. If you’re married and filing jointly, you can deduct interest paid on loans of up to $1 million.
- Health insurance premiums. Health insurance for the family can eat at a big chunk of your monthly income if you’re self-employed or unemployed. The good news is that you can write off these expenses. If you’re self-employed, you can write off 100% of these expenses. Instead of a deduction, though, this expense is considered an adjustment to your gross income.
- Being older. Aging does have its benefits when it comes to tax time. Older people will have an advantage over young people. That’s because seniors age 65 or older are eligible for a higher standard deduction.
- Student loan interest.If you’ve been struggling to pay back student loans, here’s a silver lining: you can deduct some of the interest you paid. You can deduct either the amount you paid or $2,500, whichever is less. There are a couple exceptions. You can’t deduct student loan interest if your spouse is listed as a dependent on someone else’s tax return or if you’re married and filing separately.
- Teacher-related expenses.It’s rare to find a school without a limited budget. This leaves teachers to foot the bill for necessary classroom supplies. Fortunately, K-12 teachers can deduct up to $250 for supplies. The deduction is simply subtracted from income, so you don’t have to itemize it.
- Job search expenses.Sometimes it costs money to find a job. Perhaps you had to pay for parking and tolls to attend a job interview. Maybe you paid a recruiter or an employment agency to help you find a job. Expenses you paid toward finding a job can be deducted on your tax return. The main rule is that you must have been looking for a job in the same line of work as your most current job. So if you’ve been switching career fields, you won’t be able to itemize this deduction.
- Job relocation expenses.If you do find a job and have to relocate, you can also deduct the moving expenses. The IRS allows you to deduct the cost of moving your items to your new home. You can also write off lodging expenses.
- Certain home renovation costs.If you’re renovating your home in order to increase its value, then you won’t be able to deduct the costs on your tax return. However, if you make renovations for medical purposes – like adding wheelchair ramps or making the bathtub or shower more accessible, for example – then you can deduct the expenses.
- Gambling losses.So you went a little crazy on your trip to Las Vegas and lost a few thousand dollars? Luckily, you can claim your gambling losses as “other miscellaneous deduction.” There is a limit, however. You must list any gambling winnings as taxable income, and you can only deduct up to the amount you won. So if you didn’t win anything, you can’t deduct anything. If you do claim losses, be prepared to show proof.
- Car registration.Not only do you have to buy the car, but then there’s insurance, gas, maintenance and then registration. Don’t fret! The couple hundred dollars or so that you spend every year on registration may be able to be used as a tax deduction. Certain rules apply, but take note and be sure to enter the number into your tax software program to see the savings.
- You may not be happy that you had to pay your wife alimony as part of your divorce settlement, but there is a silver lining to this: you can deduct the payments on your tax return. However, in order to qualify: you can’t file jointly with your former spouse; the payments must have gone directly to your former spouse; you must have paid with cash, check or money order; you must be legally separated and not living together; and the payment cannot be for child support.
- Work uniforms.If your employer requires you to wear a specific type of clothing that you must pay for, you can deduct the expenses. The clothing must be something you wouldn’t typically wear for everyday use, so if your employers requires dresses or suits, then those can’t be deducted. However, costumes, protective clothing and military uniforms can be considered tax deductions.
- Using your vehicle for business purposes.If you own your own business and use your vehicle to meet clients – such as a carpenter or salesman – then you can deduct either the mileage or the actual operating expenses. That’s why it’s important to keep detailed logs of the miles you travel for business purposes.
- Unusual business expenses.If you buy something that benefits your business, then it generally is a valid deduction, as long as you can justify it. For example, a bodybuilder can deduct body oil uses for competitions. A junkyard owner was approved to deduct cat food expenses because he used the cat food to attract cats, which kept the mice away. If you use beer to attract customers, then that can also be considered a legitimate – albeit unusual – business expense.
You probably didn’t realize that the IRS allows you to deduct more than you think. Cars, houses, moving expenses – many of the things you spend your money on may be able to help you out financially when it comes time to file taxes.
When you do taxes this year, you may want to consider itemizing your deductions instead of automatically taking the standard deduction. Don’t leave money on the table. Chances are, many of the above deductions apply to your situation, so don’t miss out on a lower tax payment or a bigger refund.
Article by Linsay Thomas at DealsPlus.com
