Filing your taxes can be an arduous and often confusing process, and it’s easy to miss valuable deductionsand credits that could see you or your business saving hundreds to thousands of dollars. Consider this list and determine whether these government caveats could fatten your wallet after this year’s April 18th filing deadline.
Out of Pocket Charity
You might say you’ve already considered your large charity contributions on your tax filings, but have you thought about the small out of pocket donations you’ve made throughout the year? If you’ve done work for a charity throughout the year, you can also deduct the expenses that came from those efforts. Did you provide transportation for a charity event all day? You might be able to deduct the cost of gas.
Refinancing Mortgage Options
Have you recently refinanced your mortgage? If so, you can deduct the points over the life of the loan. Say you have a 20-year mortgage; each year, you can deducted 1/20th of the points per year. It might seem like a small percentage, but it’s free money that you’re essentially giving away if you don’t claim it on your taxes.
Earned Income Tax Credit
About one fourth of the taxpaying population eligible for the Earned Income Tax Credit fails to claim it for various reasons, missing out on valuable funds. This is not a deduction, the EITC is a refundable tax credit that can add up to over $6,000. Many incorrectly assume they don’t qualify because the credit is designed for low income workers, but many middle class families may also be qualified due to job loss, pay cuts, or slashed work hours. The amount you’ll receive in your credit is highly dependent on a variety of factors, including your marital status, your employment status, and how many dependents you support. Remember this: even if you don’t owe taxes, you still need to file a return to receive the credit.
Medicare Premiums
If you’re eligible for Medicare and you continue to run your own business, then you can deduct the premiums you pay for various parts of Medicare. Keep in mind that you cannot claim this deduction if you can be covered by an employer-subsidized health plan if you hold another job or if your spouse’s employer offers family coverage.
State Sales Taxes
If you reside in a state that doesn’t impose any income taxes, this deduction is going to become your best friend. If you find yourself in this situation, you have a decision to make between deducting either your state and local income taxes, or your state and local sales taxes. As a general rule, it’s regarded as more beneficial to choose the income tax deduction. These deductions can vary based on purchases you might have made throughout the year, like vehicles of different types or home building materials. There are tables available from the IRS that can make this portion of filing a lot easier, and it’s never a bad idea to get some help from a certified tax preparer if you’re confused.
Dependent Care
There are various deductions available for taxpayers who handle the expenses of a dependent, whether that’s for children or an elderly parent. If you claim your child as a dependent, you have the opportunity to deduct expenses that you put towards child care. This deduction is not without its caveats; both parents must work, or the parent who does not work must be enrolled as a student or disabled. There are also specifications on the type of child care. Before and after school care and day care are all applicable, but overnight camps are exempt from this deduction provision. For elderly parents, costs that result from in-home care or nursing home care will fall under this distinction.
If you need help navigating the complex world of taxes, I’d recommend seeking out some professional help from a company like Community Tax. It’s the best way to find out what unknown deductions you might qualify for and receive a much larger tax refund. Both for personal and business reasons, using the wealth of knowledge a professional tax preparer possesses is never a bad idea.
