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Throughout the complexities of the Internal Revenue Code, there are deductions available for many individuals. Most people are aware of the common deductions; such as home mortgage interest, property taxes, charitable donations, etc. There are other deductions, however, that could be applicable to many taxpayers but few people are aware even exist.
Here 7 deductions many individuals overlook at tax time:
State Income Tax or Sales Tax: The IRS allows you to deduct either state income tax or sales tax. In the handful of states where there is no income tax, this choice is a no-brainer. However, many in these states fail to keep accurate records of their purchases so they can take full advantage of the sales tax deduction. In addition, taxpayers in states that have an income tax are often unaware there is another option.
Points for Refinancing a Mortgage: When you buy a home, you are allowed to deduct the 100% of the points you paid on the mortgage during the year you purchased the home. If you refinanced a mortgage, you can still deduct the points, but it is spread out over the term of the loan. For example, if you took out a 15 year mortgage, you can deduct 1/15th of the points you paid for each of the next 15 years. It may not seem like much, but every little bit adds up.
Child and Dependent Care Credit: The child tax credit is available to most middle-income earners with children, and most taxpayers remember to claim it. However, there is a lesser known credit available for qualifying child and dependent care expenses. The maximum annual child and dependent care tax credit is $6,000.
Moving Expenses for a New Job: If you took a new job and moved more than 50 miles to go to work there, you are allowed to deduct 23 cents per mile for moving yourself and your household furnishings to your new home. This deduction is available even if you take the standard deduction and choose not to itemize. In addition, if you drove your own vehicle, you can also deduct tolls and parking fees.
Jury Compensation Paid to your Employer: Some employers provide workers with paid leave to perform jury duty. All they ask in return is you turn over to them the jury fees you were paid. The challenge is the IRS considers these fees taxable income, unless you remember to deduct any fees you gave to your employer.
Educator Expenses: Eligible teachers are allowed to deduct up to 2% of their adjusted gross income for qualified expenses such as books, supplies, lab fees, and transportation costs.
Self-Employment Taxes: Self-employed individuals are required to pay 100% of their Social Security and Medicare taxes, as opposed to 50% for employees. This amounts to 15.3% of your taxable income. There is some relief available, however. You are allowed to deduct half of your self-employment taxes on your federal income tax return.
There are numerous other little-known deductions throughout the tax code for taxpayers to take advantage of. So make sure you are taking full advantage of what is available to you in your situation, speak with a local tax professional.