Tax Deductions – Money You Might Miss

Come tax time, we are all trying to find ways to pay less in taxes. If we can get some money back, that would be even better. Ideally, it would not be so difficult for us to figure out what we are legally entitled to claim. Unfortunately, that is not the case. The tax code is long and difficult to understand. We end up having to rely on others to explain the rules to us. I sure hope that one day our taxes get simplified. Until then, I offer you some information on commonly missed tax deductions.

Before I start listing out deductions, I want to explain a term that I will use. The term is "above the line". Above the line means that the deduction is taken off of your adjusted gross income directly. It is not lumped in with your itemized deductions. Why is this important? It matters because you may choose to itemize your deductions or take the standard deduction. Many deductions, such as interest on a home loan, cannot be used unless you itemize. Deductions that are above the line can be deducted even if you take the standard deduction. If you would like more information on tax deductions and an explanation on the standard deduction, you can visit an article about it at http://mytaxdeductions.blogspot.com.

Some common deductions that are missed include non-cash contributions to charities. When you make a contribution of clothing, food, computers or other items, make sure you get a receipt. Many times the charities will give you a blank paper and not take the time to list out the items with their values. Make sure you list all the items you donated and put the fair market value of the items. If you are not sure of an item's value, you may be able to visit a thrift store and find the value of a similar item.

Another deduction is for those who had to move to take their first job. If you moved more than 50 miles and paid for the move yourself, you can deduct the expense above the line. Healthcare expenses are also tax deductible, although they usually need to be at least 7.5% of your adjusted gross income before you can use them. However, if you are self-employed, the rules change. As long as you are not on any employer's health plan, you can deduct all health care expenses above the line. Teachers, teacher's aides and principals for kindergarten through twelfth grade may deduct up to $250 for materials purchased for teaching. Those purchases can be made for the tax year or to be used the next year. Expenses for higher education are also tax deductible above the line if you make less than $65k or $130k filing jointly. There are also tax credits available called the Hope Credit and the Lifetime Learning Credit. You should see if you qualify and decide if the deduction or the credits give you a lower tax liability.

Two other items that may produce deductions are points paid during the refinance of a mortgage and the purchase of a clean fuel vehicle. You should check the make and model of the vehicle you purchased. The amount and availability of the deduction is dependent on the model and fuel efficiency of the vehicle.

So until our government decides to implement a simpler tax system, preferably one that allows you to keep your hard earned money, you should be well aware of the tax deductions you have available. If any of these were news to you, I suggest you do some homework before tax time or take advantage of the complete list of tax deductions available in TurboTax or TaxAct. These systems give you all the help you need to make sure you do not miss any deductions.