Many people miss tax deductions and credits that would help them pay less or get a refund at tax time, including costs associated with volunteering, additional home credits and deductions, and expenses associated with unemployment.
Here’s a list of commonly missed deductions that individuals may be able to claim at tax time with proper documentation:
1. Volunteer Expenses
Sometimes it pays to volunteer. You can’t deduct the value of volunteer work you do for your favorite charities, but you may not realize you can deduct expenses related to providing that volunteer work. For example, if you drive senior citizens to the grocery store once a week as part of charitable work with a church or civic organization, or pay parking fees associated with attending board meetings for a charitable cause, you can claim the standard mileage deduction or itemize your gasoline costs.
2. Sales Tax Deduction
Many taxpayers do not know they can deduct State and local sales taxes. However, it primarily benefits only taxpayers in states that do not have an income tax. Why? Well the IRS allows you to deduct either State and Local income taxes or state and local sales taxes. Since typically for most taxpayers their State and Local income taxes are larger than sales taxes, it makes sense to deduct the income taxes over the sales taxes. However, if you are in a state with no income tax, then obviously deducting the sales tax you paid will lead to a lower tax burden. The IRS has tables to use based on the state you live in and your household income. If in doubt, contact the IRS or your tax professional.
3. Student Loan Interest
You can deduct the interest you paid on a qualified student loan (loan to pay expenses from an accredited educational institution) without the need to itemize deductions on your Schedule A. However, there are some limitations. First, you can only deduct a maximum of $2,500 dollars in interest (per return, not per person). Second, your filing status cannot be “married filing separately.” Third, there are AGI or Adjusted Gross Income limitations whereby you cannot claim the deduction. For example, for filing statuses other than “married filing jointly,” the student loan interest deduction becomes phased out between $60k and $75k.
4. Medical Expenses
Most people know that if total medical expenses exceed 7.5% of your adjusted gross income, you can write them off as a deduction. What you may not realize is that you can include your travel and parking expenses associated with doctors appointments.
5. Losses Due to Disasters
If you were unfortunate enough to have losses associated with a natural disaster that has been labeled a “federal disaster area,” and your insurance doesn’t cover the whole loss – you can write off the fair market value of the item(s) on your tax return.
6. Unemployment Expenses
If you’re unemployed and actively seeking a job, your expenses associated with the job search are tax deductible. If you have the opportunity for an interview that requires a stay in a hotel, for example, you can deduct expenses relating to travel and the hotel you stay in the night before the interview. You can bring your partner too, since the hotel costs the same whether they’re with you or not. As long as your hotel is related to your job hunt, you can use it as a tax deduction. Locally, if you pay parking fees, tolls, or other expenses relating to job seeking, most are deductible.
7. Text Books Used for Work
As a student, you can’t deduct the cost of text books purchased for school. When you graduate though, if you’re legitimately using the books for work, they can be amortized and deducted as part of your professional library.