Guest post by Cathy Pierce. Follow Cathy on Twitter @mrscathypierce
Tax deductions, or write-offs, could mean the difference between a healthy refund and paying money to the government. That’s why it’s important to be aware of any available deductions. Here are top 10 commonly overlooked tax write-offs.
1. Charitable Donations
Donations don’t have to be cash in order to get a tax break. As long as the charity gives you a receipt, you can claim donated items, like clothing or household goods. You can also deduct donations you make by check or credit card.
3. Education Costs
There are valuable credits, which are better than deductions because they offset your tax liability on a dollar-for-dollar basis, in the education agenda. One possibility is the American Opportunity Credit. The IRS also offers an above-the-line deduction up to $4,000 for individuals who make less than $65,000 annually.
4. Health Insurance Premiums
With insurance companies clamping down on what they cover, the IRS allows taxpayers to itemize any expenses on health care as long as the total exceeds 7.5 percent of adjusted gross income. People often think they haven’t spent this much on healthcare, but they typically forget to factor in the amount they pay out of pocket for health insurance premiums.
5. Green Credits
Do you have a hybrid car? Have you made energy efficient improvements to your house? You may qualify for a dollar-for-dollar write off up to $1,500. Expenses you can claim include energy efficient roofs, water heaters, skylights, or insulation.
6. Investment Costs
Often, people think about investments and adding the amount of interest they earn to their income for the year. However, you can deduct investment expenses, such as brokerage fees.
7. Retirement Credit
Younger individuals have the opportunity to reduce their tax bill by setting a portion of their income into retirement plans. Depending on the plan you pick, you don’t have to pay taxes on the part you invest.
8. Casualty Benefits
People living in a disaster area, as declared by the President, often get tax benefits to help compensate for losses occurring because of calamity. For example, people who lost homes and property due to Hurricane Katrina were able to write off some of their tax bill due to the tragedy.
9. Sales Tax
Federal taxes aren’t the only place where you can get deductions. Your state may offer certain deductions separate from Federal ones. In some areas, you may be able to deduct any sales tax you paid from your tax bill.
10. Unpaid Debt
If you made a personal loan to a friend or relative and never saw a penny, you may be able to deduct part of the loan from your taxes.
Make sure you don’t miss any of these deductions. Also, check with a tax professional each year to see what new deductions or changes the IRS has made before you file your return.