10 Most Overlooked Tax Deductions

Post on: 16 Май, 2016 No Comment

10 Most Overlooked Tax Deductions

Through deductions. American wage earners have the chance to pocket more income, rather than hand over their hard-earned cash to the government. For those who keep good records, deductions can mean more money them — and less for the IRS. You probably know the most common deductions, such as deductions for property taxes and charitable donations. but there are related deductions you might be overlooking. Read on for some of the common fees and expenses you can deduct to reduce your tax bill.

The Deductions Caveat

Some of the deductions listed here fall under the label of miscellaneous deductions, and they are below the line — that is, you take the deductions after you’ve calculated your adjusted gross income (AGI). To cash in, you must itemize deductions on Schedule A of your federal return rather than take the standard deduction. The sum of all of your miscellaneous deductions must be more than 2% of your AGI; therefore, if your AGI is $50,000, all of your miscellaneous deductions must top $1,000. The kicker, of course, is that you can deduct only the amount that exceeds 2% (that is, the amount above and beyond $1,000). (For background reading, see An Overview Of Itemized Deductions .)

Meeting the 2% requirement for itemizing deductions, doesn’t mean you should itemize. Always compare the amount of the standard deduction to the amount you could deduct by itemizing.

Selling Your Home, Sweet Home

Owning a home can give you hefty tax write-offs each year, from deductions on points paid when you bought the home to deductions on mortgage interest and property taxes while you lived in it. When you sell your home, though, you also get some tax benefits: you can deduct the fees you incur to unload your home. You can still deduct a portion of the property taxes you paid while you lived in the home, the commission you paid to your real estate agent lowers the sales price to reduce your capital gains tax, and any fees you paid at closing. (For related reading, see Use Real Estate To Put Off Tax Bills and The Mortgage Interest Tax Deduction .)

Driving Home a Tax Break

You pay a sales tax on your car when you buy it and then some states continue to tax you each year for, as the state of Kentucky puts it, the privilege of using a motor vehicle upon the public highways. If your state calculates a percentage of the vehicle tax based on the value of your car, then you can deduct that percentage as part of your personal property taxes. Only a few states, such as Nevada, calculate their registration fees in this way.

10 Most Overlooked Tax Deductions

Most states send out a notice to demand their tax payment to register your car each year. After you slap your new decal on your car, file away the receipt and add that payment to your deductions for personal property taxes in April.

Fees for a Worthy Cause

You donated your skinny jeans and your wagon-wheel coffee table to Goodwill and reduced your taxes by increasing your miscellaneous deductions, but you can fatten the sum of your miscellaneous deductions when you remember to include associated fees, such as appraisal fees, for the big-ticket items you donate.

The IRS requires that you provide a qualified appraisal of the item with the return when you donate an item worth more than $500. For items like electronics, appliances and furniture, you need to pay a professional to assess the value of your donation; that fee for service is deductible. (For more on charitable contributions, see It Is Better To Give AND Receive .)

Here your chance to leave a comment!