Is the IRS on your gift list? You might not think so, but if you don't take all the tax deductions that you're entitled to, then you're just giving your money away. Many tax deductions and credits are not well known. How much money are you giving to the IRS that could be happily filling your wallet instead? Know more about the 7 most overlooked tax deductions.
1Mortgage Refinancing Points
If you've refinanced your mortgage, you can deduct those points. In many cases, they have to be deducted over the life of the mortgage. So, if the mortgage is for 15 years, you can deduct 1/15 per year. It's not much each year, but it adds up.
2Retirement Tax Credit
Contributions to retirement plans are typically untaxed during the period you are contributing. If your income falls below a certain level, you can also get up to a 50% tax credit to boot! The amount of the saver's credit you can get is generally based on the contributions you make and your credit rate.
3Tax And Investment Expenses
The total cost of these expenses must exceed 2% of your adjusted gross income before taking this write-off. These include things like tax preparation, any legal advice on tax matters, and all your investing expenses. Investing expenses include your fees and other costs for the investments, the mileage to drive and see your investment guru, and the cost of publications and subscriptions for investment research, like investment-oriented magazines and "The Wall Street Journal."
4Medical Insurance Premiums
If you spent more than 7.5% of your income on medical expenses, you could likely deduct the cost of your medical insurance premiums. But, you can deduct only premiums that you pay with after-tax money from your own pocket. If you're self-employed, you can deduct 100% of your medical insurance premiums without meeting the 7.5% requirement.
5Non-Cash Charity Donations
We all know to deduct the checks we write to our favorite charity, but most of us forget to deduct other things. Items like automobiles, clothing, food, furniture, and more are all deductible. You'll need to show receipts if you get audited, so be sure to collect them.
6Energy-Saving Home Improvements
You can get a 30% credit for any energy-saving improvements you make to your home. This is a credit, not a deduction. So, you do not only get to take 30% of the cost of the improvements directly off your tax bill, but you also get to save money on your utilities. You win both ways.
7Area Prone To Disaster
If your area was officially declared a disaster area, you could deduct your losses. Losses due to disasters include damage from fire, accidents, theft, and vandalism as well as natural disasters. Do some research and see if your area is classed as a disaster-prone area.
Taxes are likely your biggest expense each year, so spend some time to familiarize yourself with tax deductions. How many of these deductions apply to you? See your tax professional if you're unsure if you qualify.
Keep as much of your money as possible. After all, you probably worked pretty hard to earn it. If your financial situation is complicated, it would be wise to find a real expert. Don't try to wade through all the tax changes every year by yourself. The extra money you save on taxes can be well worth your time.