When it comes to filing your taxes, every deduction counts. The goal is to minimize your tax liability legally and pay less or get a bigger refund. The key to that is knowing every allowable deduction. Here are some purchases that you may not realize are tax deductible.
If you file your taxes yourself, you may overlook some critical purchases that are also tax deductibles. The most common overlooked tax deductibles are:
When filing your taxes, you can choose to deduct either your sales tax or state income tax from your federal tax return. If you live in a state without an income tax, you could save a lot by deducting sales tax on large purchases. You will, of course, have to itemize these purchases and keep careful records. Consult your tax professional to determine which is a better saving for you.
You can deduct the cost of your health insurance premiums if you pay more than 7.5% of your adjusted gross income (AGI) on medical expenses (doctor’s visits, prescriptions, equipment, etc.). If you are self-employed, you may be able to deduct 100% of your health insurance costs.
If you spend your own money on something while doing charity work, you can deduct those expenses as charitable gifts.
You may be able to tap into the Lifetime Learning Credit if you are working but enrolled in school or classes. You might be eligible to deduct up to $2,000 off your income taxes regardless of how old you are. However, this benefit is not eligible for higher-income people.
If you pay someone to watch your kids while you are working or enrolled in school, you can deduct the expenses. However, you will need to provide the person’s name, social security number, or tax ID if you use an agency.
No matter how strange, as long as they are legal, expenses related to operating your business may be deductible from your taxes. Consult your accountant to find out what tax deductibles are allowed and what are not.
When you are self-employed, you must pay 15.3% of your income for social security and Medicare taxes. Your employer would normally pay those. However, you can deduct the 7.65% employer portion from your personal taxes.
If you are searching for a job and your expenses exceed 2% of your AGI, you can deduct them from your taxes as long as you are searching for employment in the same field as your last position. This can include mileage and gas to and from interviews.
The best way to maximize your tax deductions and minimize your tax liability is to consult professionals. Interactive Accountants have been helping clients with their taxes for many years, and we can assist with business or personal taxes and all different types of situations.