Don't you hate it when you're doing your taxes and think, "Am I missing any deductions or credits? Is there any other way I can keep more money in my pocket?" Trust me, it happens to all of us at some point. To help you out, I've put together a list of deductions and credits that are most commonly overlooked or forgotten.
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If you don't find what you're looking for here or you have a specific question, I highly suggest popping over to TurboTax and using their free Q&A search bar. I almost always find the answer I'm looking for and trust me, as a self-employed businesswoman, I've got a lot of questions!
Here is a list of tax deductions and credits you may be missing.
1. Child and Dependent Care Credit
This is different than the child tax credit, which parents typically receive once their child is born. The Child and Dependent Care Credit applies to you if you paid for child care while you were actively working or seeking work. (I should note that you can't claim this credit if you're married filing separately.) The amount of credit you can receive is a percentage of the amount you paid based on your adjusted gross income.
2. Refinancing Mortgage Points
Mortgage points are considered prepaid interest on your mortgage. If you paid them when you refinanced, then they may qualify for a deduction. Each point if worth 1% of your loan amount, so if you refinanced your mortgage and paid 1 point on a $100,000 loan, then you will pay $1,000.
These points can be deducted but must be done over the life of the refinance term. So if you refinanced for a 15 year mortgage, then you will deduct those points over the next 15 years.
3. Job Hunting Costs
Searching for a new job can cost both time and money. Fortunately, you may be able to deduct some of these expenses on your federal income tax return. To qualify for this deduction, you must be searching for a job in your current occupation. You can deduct expenses such as employment agency fees and travel costs incurred while searching and interviewing for jobs.
4. Moving Expenses
If you recently moved to start a new job or relocate to a new location for your current job, you may qualify for a moving expenses deduction. You must meet certain requirements, such as resuming employment soon after your move date, moving at least 50 miles from your current home, and working full-time for at least 39 weeks during the first 12 months following the move.
5. Earned Income Tax Credit (EITC)
This credit is given to those making a low or moderate income. Whether or not you qualify depends on your income amount, your filing status, and the number of dependent children. You can find a table here that may help you determine your eligibility.
6. Student Loan Interest Paid for By Parents
In this case, the IRS treats interest paid by parents as money that is given to the child, which is then used to pay the student debt. And since the parents aren't liable for the debt, they cant claim the deduction themselves. As long as you (the child) are no longer claimed as a dependent, the deduction is yours up to $2,500!
7. Out of Pocket Charitable Donations
In order for you to receive a deduction, you must make a donation to a non-profit organization that has been approved by the IRS. These donations may be in cash and/or non-cash form. For example, you could claim a dresser set donated to your local Goodwill. However, you must be able to provide written proof of your donation. For example, if the IRS approves of your local church or Goodwill, you can't simply donate $100 in cash and try to take a deduction without proof that this donation occurred.
8. Personal Property Taxes
Annual personal property taxes (for example, on your car) may be deductible. In order to qualify, you must list itemized deductions on your federal income tax return and meet all the local requirements. Since these taxes are often imposed by local governments, it's important that you are thorough in your research for what exactly may apply to you in your exact location.
9. Reinvested Dividends
If you are automatically reinvesting your mutual fund dividends in extra shares, you are likely increasing the "tax basis" in your fund. This "tax basis" reduces your taxable capital gain when you eventually end up selling your shares. Essentially, if you fail to increase your "tax basis" when you have the chance, it means you will overpay your taxes on the sale of those shares so take advantage while you can.
10. American Opportunity Credit
This credit is for any qualifying college or university student to help them reduce their taxable income while they're paying for the cost of higher education. As of the year 2015, you may claim up to $2,500 for adjusted qualified education expenses (such as tuition, enrollment fees, textbooks, etc.).
It's such a disappointment to realize you've overlooked a credit or deduction. Don't let this happen to you! If you think you may qualify for something, don't be afraid to ask for help.
What tax credits or deductions have you overlooked in the past?