8 Surprising Items You Can Claim on Your Taxes
Are you getting all the deductions and credits for which you qualify? You may be overlooking important incentives in the U.S. tax system. Don’t leave money on the table! Here are eight deductions and tax credits that you may not be aware you can claim on your taxes.
First, it’s important to understand the difference between a deduction and a tax credit.
A Deduction reduces your tax bill by allowing you to not pay income tax on certain expenses. If you’ve already paid taxes on an expense through your employer, most likely you will then receive this ‘extra’ money in the form of a refund for overpaid taxes. Your mortgage is an example of a deduction.
A Tax Credit is a dollar-for-dollar reimbursement of a percentage of an expense for which you qualify for a tax credit. The child care credit is type of tax credit.
1. Home Improvements
If you make improvements that save energy such as solar panels or insulation, you can claim a credit equal to 10%-30% of the qualifying expense. “Qualifying” essentially means that you can’t include expenses that were not for the purpose of energy efficiency. There is a $500 lifetime limit. Visit energystar.gov to learn about what qualifies.
2. Refinancing your mortgage
In addition to deducting mortgage interest and private mortgage insurance premiums, you can deduct the points paid when you refinance your loan. However, don’t deduct it all at once and instead divide the total amount by the number of years remaining on the mortgage. Have a 30-year mortgage? Divide the total by 30 and take that amount of a deduction each year.
3. Helping others
You likely know that you can deduct contributions to charities and donated goods, but you can also deduct mileage when you donate your time with 501c organizations (charities). Note your mileage to/from the organization and multiply by 14 cents to get your deduction.
4. Day Camp
Day camp during the summer takes the place of day care for many parents. If your children are under the age of 13, you can claim it as part of the child care credit.
5. Work related expenses
If your employer does not reimburse you for certain work expenses, they could be deductible. Examples: union dues, career advancing classes, job hunting expenses (faxing, mailing, paper, ink) within your current career path, relocating for a new job, or cell phone minutes/data used to communicate with co-workers on business. However, for cell usage don’t get carried away! You can’t claim home office deductions if you primarily work somewhere else.
You or your dependent may qualify for either the American Opportunity or Lifetime Learning Credit, but not both.
7. Contributions to HSAs
If your employer offers the option for a Health Savings Account, be sure to factor in your deduction for contributing to your HSA.
8. Being an Entrepreneur
You can deduct half of your self-employment tax, health insurance and contributions to certain retirement accounts along with many more deductions, so be sure you know what you qualify for. You may need to complete Schedule C. Read and complete this form carefully. The IRS looks a bit more closely at forms than personal taxes.
When it comes to taxes, you need to pay what you owe, but not a penny more. Determining what one qualifies for isn’t always easy and you should consider talking to a professional who can help you understand these qualifications and guidelines. Rue & Associates is dedicated to providing innovative financial and tax services to business and individual clients. No matter the situation, we’re available help you receive all the credits and deductions that you deserve.