It’s disconcerting to realize that you could have taken one or more tax deductions but had no idea the Internal Revenue Service allowed the write-off in question. Education is important — particularly as it relates to learning about deductions if you prepare your own returns. If you overlook an allowable expense, you can file an amended return the following year, but it’s always better to get it right the first time.
Sales Tax Breaks
Consumers lead busy lives and it’s not easy to find time to collect and tally sales receipts that itemize taxes paid on everyday purchases. Overlooking sales tax deductions is a very common mistake made by consumers. Sales tax on entertainment, clothing and groceries are the tip of the iceberg. Retain and keep track of sales taxes and you may be surprised to discover that you have an impressive write-off at year’s end that you formerly overlooked.
Health Tax Breaks
People track doctor, dental and pharmaceutical expenditures when compiling tax deductions, but many taxpayers overlook premiums paid for coverage. Write off out-of-pocket Medicare premium payments, private hospitalization premiums, COBRA payments and similar medical deductions to meet the IRS-required percentage of income that’s allowable when itemizing a return. For senior citizens, some of the most frequently overlooked health-related tax breaks include home modification costs for people with mobility issues, personal care items and assisted living costs associated with caring for a chronically ill taxpayer.
Home Tax Breaks
When you purchase a home, you can deduct the mortgage points paid at closing. Once you are settled in, state-of-the-art, energy-saving improvements are also eligible for tax breaks and these write-offs are frequently overlooked. Solar panels, energy-efficient window replacements, a waterless hot water heater and geothermal heat pumps are only a few of the items a homeowner may overlook when computing tax write-offs. Additionally, taxpayers also overlook repairs and restorative work associated with fires, tornadoes or floods. It’s important to save documentation generated by insurance claims adjusters and contractors to prove these expenses.
Child Tax Breaks
Child-related tax breaks are often left off income tax returns, and investment writers aren't sure why. Perhaps parents believe that once they claim their child as a standard deduction, that’s the end of the story. But as long as your child is under 17, a $500 annual tax credit is not just allowable but often overlooked, so make sure you don’t miss taking one for each child in your household. If you have young children requiring childcare while you work, there are additional tax breaks you can claim, just as long as your child is under the age of 13.
Charitable Tax Breaks
People become involved in philanthropy because they get pleasure from helping others, but altruism needn’t stop you from taking charitable tax breaks that are frequently overlooked. For example, did you know that when traveling to and from charitable activities you can write off your mileage? In-kind donations, or donations of goods and services, are also frequently overlooked at tax time. List each in-kind contribution by its fair market value — e.g., computer, couch, clothing, appliances — and then total everything to get a tax break. Use the Salvation Army’s online valuation guide to run the numbers if you’re not sure how to estimate the worth of in-kind donations.
Investment Tax Breaks
According to Jeff Schnepper of MSN Money, many people miss out on deductions related to investment expenses. Expenses associated with managing investments are often overlooked at tax time. Tax prep fees, money management fees, legal expenses associated with taxes surrounding a divorce, estate planning fees — even phone calls to brokers, money managers and bankers — may all be allowable and are frequently overlooked. Write off the mileage and/or travel expenses incurred when consulting with the people managing your financial affairs, too. Leaving no stone unturned is the name of the game, after all.
- children image by Mat Hayward from Fotolia.com