7 Commonly Overlooked Tax Deductions
During tax season, everyone wants to pay the least amount of taxes, and if possible get a tax refund in return. Unfortunately, many people end up paying more than they have to, simply because they weren’t aware of all the tax deductions that they are entitled to. Here are seven deductions that are commonly overlooked:
- Education Credits- The Lifetime Learning credit can give taxpayers up to $2,000 in tax credits. Individuals may be eligible if they have taken classes or courses for continuing education purposes, and their employer’s do not reimburse them for the costs. A more well-known education credit is the American Opportunity credit. This credit allows a taxpayer to deduct up to $2,500 of expenses for undergraduate students.
- Educator Expenses- Any eligible teacher that teaches grades K-12 is allowed to deduct up to $250 on any supplies that they personally purchased for use in the classroom. If more than $250 is spent, the remainder can be deducted on Schedule A.
- Hobby Expenses- Any operation that makes some money but is not quite a small business, or doesn’t make a profit for more than three years may be considered a hobby. Certain hobby expenses can be deducted, but they can only be deducted up to the amount of income that was actually generated. Unfortunately, any expenses over the amount that you earned cannot be deducted.
- Last Year’s State Income Taxes- Any state income taxes that you paid for last year are eligible to be deducted on Schedule A. If you choose not to deduct your state income taxes, you can be eligible to deduct any amount of state or local taxes that you paid instead.
- Job Hunting Costs- It is important to keep track of any expenses that you incur while looking for a job because these expenses may be deducted up to the 2% of AGI limit. Unfortunately, these do not apply for your first job, only jobs within the same line of work that you have previously held. Some key expenses to keep track of that may be eligible for deduction are transportation expenses, cab fare, food and lodging expenses, employment agency fees, and the cost printing business cards and resumes.
- Financial Planning and Management Expenses- Any expenses that are incurred that have to do with managing your money or planning for the future can be deducted. This can include meeting with a financial advisor to budget money, meeting with an attorney to plan a will, or anything else that can be categorized as planning for the future.
- Tax Preparation Fees- Any fees that are spent preparing your tax return can be deducted on Schedule A. In addition, if you used a debit or credit card to pay your taxes, you can also deduct a convenience fee.
These tax deductions can help you save money when filing your taxes this tax season, so if you think you are eligible for any of these you may want to check with a tax professional. In addition, it is also a wise decision to inquire with a tax specialist because they can help enlighten you about any other deductions that you may be available for in addition to these commonly overlooked ones.