Increase Your Tax Deduction Next Year by Using These Deductions

There are many tax deductions people overlook each year, and you should know of them now and start preparing to increase your tax refund for next year. The IRS reports each year that many people overlook many deductions that could save them a lot of money. These deductions are simple to keep track of during the year; you don't have to be an accountant. Who knows how much money people lose by not claiming all their deductions? Considering, however, Americans already claim 1 trillion in deductions annually, the potential for there being a lot of deductions that are being missed by taxpayers is great.

Because one cannot deduct the time he donates to his favorite charity, many people wrongly assume their only deductions for giving to a charity are the money or goods they have given. That is not true. You can deduct out-of-pocket expenses you have incurred in helping a charity. Such expenses would include your transportation costs and travel expenses, as long as they are not part of a vacation. Your deduction for the cost of gas is 14 cents a mile for charitable purposes. You can also deduct the cost of tolls and parking. Your costs include such things as meals, lodging, air, bus, or rail costs, taxi fares, and any other transportation costs between an airport, bus or train terminal and your hotel.

Did you know you have tax deductions you can use every year for medical expenses other than just your doctor or hospital bills? You can deduct 24 cents per mile for the cost of getting to your medical appointments. You can also deduct the cost of parking, tolls, and bus, cab, or train fare.

If you have been laid off or are moving to a different job you can deduct the cost of paper, printing and stamps, if you are mailing resumes. You can deduct online expenses for posting your resume. Fees paid to employment agencies are deductible. The costs of traveling to and back home from job interviews are deductible, as are the costs of long distance calls to potential employers. You can even deduct the costs incurred of preparing a portfolio to help you in your job search.

There are some limitations, however, on deductions for a job search. If you are a college graduate looking for your first career position, the expenses mentioned are not deductible. Moving expenses to that job are, however. If you are looking for a job in a new profession, you will not get a tax deduction for your expenses. If there has been a long break between leaving your last job and looking for your new one, your expenses are not deductible.

Student loan interest is tax deducible in some cases. As a general rule, you can only deduct expenses you actually pay. There is an exception, however: if you are required to make interest payments and your parents have made a payment for you, up to $2,500 may be deducted by you. Another note: the deductions may be claimed even if you do not itemize.

You can claim any out-of-pocket expenses for tax preparation publications, tax preparation software, and any money you pay for filing your taxes online. Fees paid to someone else who prepares your taxes are also deductible. You would report these expenses on Schedule A.

You can deduct the interest you are paying on a loan you obtained for home improvements. The costs of home repairs are not deductible. Keep adequate records if you want to claim this deduction next year.

In states that have an income and a sales tax, it is usually better to deduct the income tax. Some states do not have an income tax, however, so there is no option in those states. If you have purchased a boat or a plane, or building materials for a house, these costs are expensive and are deducible. In cases such as this, the sales tax deduction might be a better deal for you than deducting your income tax.

If your mutual funds are automatically used to be extra shares, the reinvested dividends need to be included in your basis. If they are not, you will be taxed twice. Doing this right can save you a lot of money.

If you are a military reservist and must travel more than 100 miles from your home for your meetings or drills, you may deduct 55 cents per mile for gas. You may also deduct the costs of lodging.

You can reduce your taxes dollar for dollar for every dollar you would pay in taxes for child care costs.

Don't forget to deduct your state taxes paid the previous spring.

You can deduct estate taxes you paid on behalf of a relative who died.

You can deduct the points you incurred in refinancing a mortgage. They must be deducted over the life of the mortgage. If it is a 30 year mortgage, you would be able to deduct 1/30 of the amount you paid each year or $33 for every $1,000 you paid in points.

You can deduct jury duty pay you have turned over to your employer. After all, this is considered taxable income. On a 1040 form, you would report it on line 36, which is used for the total of all deductions that get their own lines.

This is not a complete list of all the deductions people commonly missed, but of some of the ones missed the most often. Claiming these deductions could save you a lot of money.

Citations:

8 commonly overlooked tax deductions, by Kelly Phillips Erb, Walletpop.com

The Most-Overlooked Tax Deductions by Kevin McCormally, Kiplinger.com