January 31, 2014

10 Unknown Tax Deductions

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No matter how many weeks and months we have to prepare ourselves, tax season always seems to sneak up on us. Before April 15 rolls around, though, make sure you are doing everything you can to hang on to all that money you have earned. To help you out, CreditDonkey.com went in search of 10 relatively unknown tax deductions. They're easily overlooked, and could mean the difference of hundreds, or even thousands, of dollars.

1. Enormous Medical Costs

You may have forgotten about this one as there’s a stiff threshold for getting a deduction and you have to go through the trouble of itemizing everything. You can claim this only if your total medical expenses are more than 10% of your adjusted gross income (less if you’re at least 65 years old). Think back over the past year and see if your medical expenses that weren’t covered by your employer will add up. These could include things like batteries for your hearing aids, eyeglasses, crutches, and even fertility treatments. The latter is a big expense and one of the scenarios where you might actually get the deduction.

2. Health Insurance Premiums by the Self-Employed

Do you own your own business? You could deduct your health and dental premiums for the year, and this covers you, your spouse, and your dependents. Individual health insurance plans are expensive, so see if you can offset it this way.

3. Your Electricity Bill (Well, Some of It)

If you have a significant amount of business that you are running out of your home, you may qualify for the right to deduct a portion of the cost of running your home, including electricity, high-speed Internet, mortgage interest, even trash pickup. The key is these things all have to have a tie to running your business. You’ll have to do some math to figure out how exactly to take the home office deduction. In past tax years, you had to determine the percentage of your home used as a home office, as well as your actual expenses. There’s now a simpler method, which allows you to skip figuring out your actual expenses in lieu of using a prescribed rate multiplied by the amount of square footage that applies.

Keep good records. The taxman will be paying particular attention to this area if you are audited. Even if you’re not self-employed but you telecommute for your job because your employer asked you to, you may also qualify for this deduction as well.

4. The Price of Marketing Yourself as a Job Candidate

Millions of Americans looked for work in 2013, and if you were one of them, you may be able to deduct the expenses you incurred during the job search. If you went out of town, you may be able to write off food and lodging, as well as cab fares and fees you paid to an employment agency.

As long as you have the receipts, even stamps, business cards, and the cost of printing a resume may qualify for a deduction. Job-hunting expenses have to be related to your current occupation, though, to count.

5. Charitable Donations – Not Just the Cash and Bags of Clothes

If you donated some cash to your cousin’s marathon fundraiser and, say, a car or some furniture to a local charity for kids in need, no doubt you realize you can claim a deduction on your federal taxes. But don’t forget about the small donations: If you paid money out of your own pocket to help a nonprofit by, for example, making some meals for seniors or racking up mileage while you donated a day of your time, hang on to those receipts and records. As long as your total charitable contribution is at least $250 for the year, you can claim those costs on your tax forms.

Nonprofit schools, churches, and even the Girl Scouts (although not the cookies!) all count when it comes to charitable contributions. To get the break, you’ll need a form from the place you helped.

6. The Cost of Making Your Taxes Easier

If you regularly use services like TurboTax, you probably realize this one already as the software will prompt you to plug in how much you paid the year before. But if you’re a tax-prep newbie, you may not realize you can offset the expense you make this year when you put together next year’s form.

It doesn’t work if you used a free service or software to assist you. Although it is not recommended that you use a credit card to pay your taxes, you may also be able to deduct the convenience fees you incurred when you paid the government.

7. Losses Due to Theft or Destruction

If a natural disaster, like hail, damaged your car or your home, you may be able to deduct the portion of money your insurance company did not reimburse you. Even a car accident may qualify, as long as you didn’t cause it willfully. Some instances involving the theft of your property may also fall under this deduction.

Losses due to theft or destruction are kind of a slippery slope when it comes to your taxes. There are plenty of exclusions; however they may work to your advantage when it comes to reducing your taxable income.

8. Jury Pay You Had Given Up to Your Employer

Did you serve on a jury in 2013? If you did, you may qualify for another write-off. While some employers keep paying an employee’s salary during jury duty, it is not unusual for the company to then require the employee to turn over their jury pay to the company.

The IRS wants the taxable income, though, so you’re allowed to deduct any amount you give to your employer. You’ll find this on line 36 of IRS form 1040. Just add the amount in to your other write-offs and put “Jury Pay” on the dotted line next to it. The deduction serves as an adjustment to your income.

9. Credit Card Costs

We got your attention with this one, didn’t we? While you can’t deduct the interest you’ve had to pay on your personal credit cards, you may be able to deduct processing fees you incurred on your business credit cards for purchases or services that you needed to run your business. This could, in some cases, include side businesses (for example, if you are an active eBay or Etsy seller). This may also apply to PayPal charges if your client or customer insisted on using that service to pay you and you gave up a percentage of your fee for the convenience.

10. Lifetime Learning Credit

(OK, Not a Deduction But Still Worth Knowing About)

Rounding out the top 10, college tuition deductions aren’t just for your children. If you went back to school in 2013 to further your job skills, you too may be able to claim a credit on your federal taxes. Even if you’re retired and took some classes at your local community college or vocational-tech school, the Lifetime Learning Credit still counts. You don’t have to be trying to get a degree.

The credit is for up to $2,000 a year, and there is no limit on the number of years you can claim it. Qualified expenses include tuition, books, and supplies. Income restrictions are $63,000 for single filers and $127,000 for married filing jointly. Because the Lifetime Learning Credit is a credit and not a deduction, it reduces your tax liability directly.

Before you send in your federal taxes this year, make sure you have considered all the possible deductions or credits you can. After all, it is your hard-earned money at stake.

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