Common Things That Can Be a Tax Deduction
By Steve Smith
You might not be aware of some of the common things that you do each year that might be a tax deduction to lower your tax bill or increase your tax refund on your tax return. Here are some of the common things that you might not have considered.
1. Sales Taxes
This is a great benefit and money saver for those that live in a state with no income tax. You have the option of deducting sales taxes or state income taxes off your federal income tax. Even if you paid state taxes, the sales tax break might be a better deal if you made a big purchase like an engagement ring or a car. You have to itemize to take the deduction, but the IRS provides tables to use as a guide.
2. Health Insurance Premiums
Medical expenses can be expensive and the IRS provide a beneift to the cost of insurance premiums. For most W2 taxpayers, deductible medical expenses have to exceed 10% of your adjusted gross income to be deducted. If you are self-employed, you are able to deduct 100% of your premium cost. This will be taken off your adjusted gross income rather than as an itemized deduction.
3. Tax Savings for Teachers
Due to the economy and the school budgets, teachers often purchase supplies or other important items for their class. The IRS recognizes this and provides qualified K to 12 educators to deduct up to $250 for materials. This gets subtracted from your income, so you can take advantage of it even if you do not itemize.
4. Charitable Gifts
Everyone knows that you can deduct money or goods that are donated to charity, but what most people do not know is that you can deduct out-of-pocket expenses for charitable work. So what does this mean? Here is an example, if you make food for a charity fundraiser, you can deduct the cost of the ingredients you used to bake it. So save those grocery receipts so you can itemize those cost!
5. Paying the Babysitter
Again on the same theme of out-of-pocket expense for charitable work. If you had to hire a babysitter while you were attending the charity fundraiser, you can deduct the cost of a babysitter if you’re paying her to watch the kids while you volunteer to work for no pay for a recognized charity. You can list the cost of a babysitter as a charitable contribution on your return, if you can document that while the babysitter was performing her/his duties when you were volunteering.
6. Lifetime Learning
The IRS encourages continual lifetime learning and provides a number of deductions geared toward students. Students does not exclude those that are working full-time and continuing to take course to educationally improve themselves. The lifetime learning credit can provide up to $2,000 per year, taking off 20% of the first $10,000 you spend for education after high school in an effort to increase your education. This phases out at higher income levels, but does not discriminate based on age.
7. Unusual Business Expenses
Anything that is used to benefit your business and you can document the reasons for it, you generally can deduct it off your business income. For example, a professional surfer, can deduct sunscreen that he/she uses during competition.
8. Job Search
Looking for a job can be expense. If you are looking for a job in the same field, you itemize your deductions, and these expenses exceed 2 percent of your gross income, any qualifying expenses over that threshold can be deducted. Examples deductions includes mileage you put on your car driving to interviews and the cost of printing resumes.
9. Self-employed Social Security
When you are self-employed, you have to pay 15.3% of your income for social security and medicare taxes, the portions ordinarily paid by both employee and employer. However, you do get to deduct the 7.65% employer portion off your income taxes.