Not being aware of certain tax deductions can really cost you when you file your income tax return. Unfortunately, many taxpayers aren't aware of some of the most common and largest deductions they can make.
If you're itemizing deductions on your tax return, you should be aware of the following seven deductions to minimize your tax liability:
- Health insurance premiums- Medical expenses can be very difficult to afford. This is especially true for those with chronic health conditions. Fortunately, you can get back some of the money you invested in health care when you file your taxes by deducting health insurance premiums.
- Teaching supplies- Teachers who spend their own money on supplies throughout the school year can deduct these expenses. It's not uncommon for teachers to pay for supplies that aren't covered by their school out of their own pocket. Teachers should keep receipts so that they can deduct expenses when filing their taxes.
- Babysitting expenses- If you have young children, chances are you're paying for babysitting services on a regular basis. If you keep babysitting expenses well documented, you can deduct them thanks to the Child and Dependent Care Credit.
- Sales taxes- Money you pay out in taxes other than income tax can often be deducted from your income when you calculate your income tax liability. For example, sales tax can be deducted. Sales tax is typically deducted for taxpayers who have made a large purchase during the year. For example, you'll definitely want to deduct sales tax if you've bought a new car over the last year.
- Investments in a job search- Have you been on the hunt for a new job in the past year? Job search expenses may be looked at as business expenses, so you can deduct them from your income. Money you spend traveling to interviews, printing out resumes, or doing anything else in pursuit of a job could be used as a deduction, but keep those receipts!
- Educational expenses- The government encourages people to pursue educational opportunities by offering many different tax credits. Tax credits offered to college students are especially significant. Look into the Lifetime Learning Credit and the American Opportunity Tax Credit.
- Charitable donations- Many Americans feel more comfortable giving money to their favorite charity than to the government. These taxpayers can reduce their tax liabilities by deducting charitable donations from their income. It's even possible to deduct expenses paid out in the course of volunteering for a charitable organization.
For more information, contact a local tax accountant like Hy Appelbaum CPA.