Each year when tax season rolls around we clamor to get our income tax forms filled out and dropped in the mail as quick as possible. Many of us hire a professional to do this for us. Nothing wrong with this, but did you ever consider they may not be getting you the full return you’re entitled too? I did.
Tax deductions, in essence, lower your taxable income level. The result is a lower taxable liability. It’s important to make sure you reap the benefits of all available deduction you’re entitled too. Here’s some deductions I discovered when I went looking myself.
The following are a few ways to take advantage of these legitimate tax deductions you shouldn’t miss out on.
* Save all your receipts for any medical and dental expenses you incur throughout the year. If these expenses exceed 7.5% of your Adjusted gross Income (AGI) and meet the criteria, including travel expenses to and from medical treatments, uninsured treatments (false teeth, extra eyeglasses, hearing aides etc.) and necessary medical cost incurred as a result of a doctors treatment strategies (humidifiers etc.) they are legitimate deductions.
* Save receipts for work related expenditures. Those steel-toed boots, uniforms and safety glasses that are a requirement for your job are tax deductible. Any other out-of-pocket expenses that are a direct result of performing the duties required in your line of work are also deductible.
* The cost of preparing your income tax returns is deductible. It may not cost you a lot to have someone else prepare your returns, but either way, the expense is deductible. Don’t forget to ask for your receipt. Also, be sure to save the receipts from any software products you purchase if completing your income tax returns yourself.
* Interest paid on a home or equity loan, and any taxes you’ve paid throughout the year are tax deductible. These interest payments can sometimes add up to thousands of dollars, so be sure to include them.
* You may also deduct the cost of tuition paid to a qualified postsecondary educational institution up to $4,000.00 dollars, as long as the eligible student is yourself, your spouse, or a dependent that you claim for exemption purposes on your tax return.
* It may be hard to swallow, but you can also deduct any gambling losses for the year, as long as they are an offset to any gambling gains. If you play the lottery, save all those losing scratch off tickets! If you should hit it big in a particular year, you’ll be able to use those losing tickets to offset your winning one.
* If you’ve had to relocated for a job, some of the expenses for the move are deductible. If the move has taken you at least 50 miles away from your current residence, you are a full-time employee, and you work 39 weeks of the 52 weeks immediately following the move, you are eligible for this deduction. Save all receipts for moving your household and personal items, and keep track of your mileage, as well as any parking fees and toll costs.
* Charitable deductions are often overlooked by people. Qualifying as charitable deductions are any dues you pay to a qualifying organization, out-of-pocket expenses incurred while providing services to a qualifying organization, any household donations including clothing (as long as the donations are in good condition) and any cash donations.
* Make contributions to a qualifying retirement plan. This money is considered a tax credit rather than a tax deduction, but in actuality is a better deal. The money you contribute is pre-taxed which will reduce your gross income at the end of the year.
* Contributions to a qualified IRA account are a tax credit also. As with the retirement plan, these monies are pre-taxed, but they produce the same effect in lowing you annual gross income. Be aware that there are limits to these pre-taxed contributions. In 2006 the cap was $4,000.00 dollars. Contributions to a Roth IRA are not deductible.
These are great tax deduction opportunities for the individual taxpayer. However, it’s important to prepare for them throughout the year. Do this by saving ALL paperwork relevant to these deductions. You should retain all documentation for up to 7 years. You never know when Uncle Sam will come knocking on your door asking to see them
As with almost everything relevant to our government, things change. Keep up to date with these changes, and if someone else prepares your income tax returns, make sure they are current with any changes also.