OVERLOOKED TAX WRITE-OFFS

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12 Tax Write-Offs That Are Easy to Overlook

No one wants to pay more in taxes than they have to, but the U.S. tax code is so complex that it’s near-impossible to be sure you’ve taken advantage of every tax break you qualify for. Some tax deductions are extremely obscure, but they can also be quite lucrative if you qualify to take them. Below, we’ll look at 12 often-missed tax deductions that can add up to considerable savings.

1. Job search expenses

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Money you spend looking for a job in the same line of work as your most recent job can be deducted as itemized expenses. That includes the costs of preparing resumes and other job application materials, fees you pay to professional headhunters or employment agencies, and transportation to and from interviews.¹

2. Penalties for early withdrawals from bank accounts

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Banks often charge early-withdrawal penalties if you take money out of a certificate of deposit before it matures. You’re allowed to deduct those penalties from your income, reflecting the fact that they are generally stated as forfeiture of interest that you’ve already earned. Note that you may not deduct early-withdrawal penalties you’ve paid for taking money out of retirement accounts before reaching age 59-1/2.

3. Driving expenses for charity work

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Expenses you incur as part of doing work for qualified charities are tax-deductible. That includes travel expenses, and you can either deduct the actual expenses or take $0.14 per mile that you drive for charity work.

4. Moving expenses

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Moving expenses are deductible if you move for work and meet various tests. In particular, you must work full-time for 39 weeks in the 12 months after you move, and the new job must be at least 50 miles farther from your old home than your old job was from home. Deductions include reasonable costs, such as moving vans, storage, and travel to your new home at a rate of $0.17 per mile for 2017. These deductions are available even if you don’t itemize.

5. Alimony

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Alimony paid pursuant to a divorce decree is deductible from the tax return of the paying ex-spouse. The receiving ex-spouse must include alimony in their income. This is in contrast to child support and maintenance payments, which offer no tax deduction to the payer and are not included in the taxable income of the person receiving the payments.

6. Health savings account contributions

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If you contribute to a qualifying health savings account, then you can deduct the contributions from your taxes up to certain maximums. If the policy covers only yourself, than the maximum deductible contribution is $3,400. For family coverage, the limit is $6,750. Catch-up provisions are also available if you’re 50 or older, boosting the appropriate limit by $1,000.

7. Tuition and fees for higher education

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A deduction of up to $4,000 is available for those paying higher-education expenses. Only tuition and required fees are eligible for the deduction, and you may not claim the deduction if your income is above a certain limit. Note that for many students, other tax breaks like the American Opportunity Tax Credit will offer better savings than this deduction, but in some cases, this provision is the best break available to you.

8. Educator expenses

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Teachers and school administrators often dip into their own pockets to pay for classroom supplies and materials. When they do, they can claim up to $250 as a deduction, even if they don’t itemize deductions. No income limits apply to this provision.

9. Higher standard deduction for seniors

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If you’re 65 or older, then you get to claim a higher standard deduction. The amount goes up by $1,250 per person for married taxpayers or $1,550 for single filers. That’s in addition to whatever the appropriate regular standard deduction is for your particular filing status.

10. Car expenses for business

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If you use your car for business, then you’re allowed to deduct your work-related driving expenses. You can either claim your actual expenses — including gas, insurance, lease payments, repairs, parking fees, and more — or use the standard mileage rate of $0.535 per mile for 2017, but you’re not allowed to do both.

11. Work uniforms

© Getty Images Uniform for military.

If you’re required to wear a particular uniform to work every day, then you can deduct the cost of that clothing. However, to qualify, the clothes must not be suitable for everyday use. For example, just because your employer requires you to wear a suit and tie doesn’t mean that you can deduct their cost, but if you have to buy a specific set of clothing, such as a military uniform or protective clothing, then you’ll generally qualify.

12. Casualty losses from disasters, theft, or similar events

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If you suffer an uninsured loss from theft, natural disasters, fires, accidents, or other unpredictable events, then you can generally deduct losses above the first $100 on your tax return as an itemized deduction. The portion that’s covered by insurance is not eligible for a deduction, but if you have to pay an insurance deductible before coverage kicks in, then that amount is generally eligible.

These 12 provisions are only some of the many tax laws that most people don’t know about. By becoming familiar with these and other tax breaks, you can make sure that you don’t pay any more in taxes than you absolutely have to pay.

Article source: The Motley Fool

 

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