Top 10 Tax Write-Off Surprises
For most taxpayers, filing annual taxes can feel like a confusing game with tons of rules and a lot of “do not pass go” moments. Fortunately, those unclear loopholes and little surprises can also work in your favor. When it comes to filing your taxes, there are all kinds of hidden deductions you probably didn’t know you could take.
Tax deductions reduce your taxable income, which in turn lowers your tax liability. They could end up saving you hundreds, maybe even thousands, of dollars and potentially move you into a lower tax bracket.
There are two types of tax deductions: standard and itemized. The IRS sets a standard deduction amount, but if you choose to itemize your deductions, you’ll want to look at these potential write-offs below.
1. Tuition and school fees. Earning your degree could allow you to take off up to $4,000 from your taxable income. The Tuition and Fees Deduction includes everything from textbooks to graduate classes, with no limit on how many years you can take this deduction.
2. Charity work. Good deeds do not go unrewarded by the IRS. Donations to your church or neighborhood Goodwill, gas mileage to and from mentoring appointments, and even memberships to some museums, zoos, and educational events count for this deduction.
3. Job search expenses. Driving to and from interviews, lodging and dining while staying overnight during your job search, and even printing and mailing costs associated with creating your résumé may reduce your 2016 taxable income as long as you are between jobs and seeking employment in your current field.
4. Medical expenses. Itemized medical expenses are eligible for deductions as long as the expenses are greater than 10 percent of your adjusted gross income. Some more unusual deductions include wigs (if recommended by a physician after disease-related hair loss), breast enlargement after undergoing a mastectomy, pregnancy tests, and even clarinet lessons when prescribed by a doctor to treat an overbite.
5. Moving expenses. The cost of hiring a moving company or renting a truck may be deductible if you’re moving for a job. The new job must be more than 50 miles from your current place of work and you must move no earlier than a year before starting in the new location and remain full time in that location for at least 39 weeks after you’ve moved.
6. Student loans. Assuming your modified adjusted gross income is not more than $80,000 ($160,000 for married couples filing jointly), you may be allowed to deduct the interest paid on student loans. If you qualify, you may be eligible to deduct up to $2,500 in student loan interest paid per year.
7. Uniforms. If your work attire is not suitable for everyday use, you may deduct the cost and upkeep of your uniform. This mainly applies to delivery workers, firefighters, healthcare workers, and professional athletes, but musicians and entertainers can also use this deduction for their stage clothing and accessories.
8. Weight loss programs. Any person diagnosed with obesity, hypertension, or heart disease may be eligible for tax deductions on expenses related to weight loss. Programs like Weight Watchers, Jenny Craig, a well as hospital-based weight loss programs, apply.
9. Child and dependent care. If your family uses child care to keep an eye on your tiny Texans during your 9 to 5, then you may claim up to $3,000 per child per year for the cost.
10. Mortgage points paid. Most people take advantage of deducting mortgage interest, but did you know that points paid can be considered a deductible as well? When securing or refinancing a mortgage, points paid to lower your interest rate could equal one percent of your loan per point. Keep in mind that the mortgage must be for your primary home, points must not be excessive, and everything must be clearly itemized on your mortgage statement.
For more information on these tax deductions and more, visit the IRS credit and deductions website.
Get more help before your April deadline with a tax lingo dictionary and these apps small business owners can use to simplify filing.
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