You can decrease your taxable income (and keep more money to yourself) without flouting IRS laws. According to Tax Foundation statistics, most Americans do not claim their tax deductions because they think that the procedure is too complicated or they are just unaware. Here is a list of 10 scenarios that are eligible for a tax write-off.
You do not have to own a charitable organization to qualify for tax deductions under the IRS’s Publication 78. If you are involved in any charitable work such as baking for a school’s fundraiser, you can write off those expenses.
- Sales or state income taxes
If you have a choice, opt to deduct state income tax. See if your state has the sales tax or income tax and use the IRS table to make your calculations. Also, add any big purchase you make such as vehicles and building materials to the sales tax rate.
- Casualty and theft
The federal government relieves you the pain of unexpected business losses through fire, floods, theft, or other unforeseen circumstances by allowing for deductions. Things that benefit your business such as body oil for a bodybuilder in a competition also fall into this category.
- Health Insurance premium
Itemize your medical expenses that exceed 7.5% of your adjusted gross income for deductions. If you are responsible for your health insurance coverage, IRS might give you 100% of your premium cost.
- Lifetime learning
Even after high school, you can claim tax deductions on education expenses. You can get up to $2,000 per year through the lifetime learning credit. However, at higher income levels, this benefit does not apply.
- Home mortgage interest
Every year, you can deduct 100 percent of the amount of interest paid on your mortgage.
- Real estate taxes and points
The fees charged by banks to get a home loan are converted into points and are tax deductible. If you are refinancing your mortgage, you deduct the points over the life of the loan.
- Self-employed Social Security
It is enough hassle paying for social security and Medicare taxes when you are self-employed. Get some relief by claiming 7.65 percent deductions from your income taxes.
- Looking for work
Hunting for your first job does not entitle you for any deductions. Once you get a placement and are moving, you can claim your deductions. If you lose your job, the costs of looking for new work in the same industry exceeding 2% of your adjusted gross income qualify for a write-off.
- Student loan paid by parents/guardians
Money spent by your mom or dad to your student loan is eligible for a tax write-off if you are not claimed as a dependent. The amount goes up to $2,500 of the interest paid.
With these deductions you can have a little extra change in your pocket.