The best way to save money during tax season is through deductions, many of which you may not be aware of. Tax season should be prepared for throughout the year by tracking and keeping a log of expenses. The things you spend money on that stimulate the economy, like owning a business or sending your child to college, should and shall grant you write-offs on your taxes. Here are many other deductions you’ll need to keep track of during the year.
Many jobs incur costs that are beyond the employee’s control. Consider all the parts of an average workday. Tax write-offs may apply to, say real estate expenses if you’re an agent and have to go in between properties all day. The most basic things that you haven’t even considered, like your phone bill, fuel, meals, and many more, can all be deducted.
Have to get your suit dry cleaned for that big pitch meeting? Need to fit the bill for an outing with potential clients? You can deduct 50% of the cost of a meal from your taxes, but if you’re not keeping a record of these expenses, then they’re your cross to bear. Make sure you add all of this to a trusty log that will help you track and budget. It’s important to think about tax season throughout the year so that you can remember to have these little things here and there deducted from your taxes.
Job Search Costs
Job hunting is rough on individuals because you have to spend money to make it. This is why if you’ve had to search for a job during the year leading up to tax season, you can write off various expenses related to the search. Any job application fees, fuel or transportation costs, or printing off your resume several times for employers can all be deducted.
Education Related Expenses
It’s no secret that educating yourself requires more than a little determination and hard work—it takes something a little more green. Therefore, you can deduct up to $4,000 from your taxes if you, a dependent, or spouse attended college. However, you must file jointly with your spouse if you want to qualify. Some states will even allow you to deduct a 529 college savings plan from taxes.
Many individuals have their student loan interest paid by their parents. If that’s the case, then the IRS gives that money used to pay for the loan to the student. If your parents aren’t claiming you as a dependent, then you can deduct as much as $2,500 of what they paid on student loan interest.
The American Opportunity Credit is a deduction that can be applied to those who attended four years of college. 100% for $2,000 of the first college expenses, and 25% of the next $2,000, with a maximum of $2,500 allowed credit. This $2,500 credit is available for those whose modified gross income is less than $80,000 a year, $160,000 for married couples. This credit is not available for those who make more than those amounts.
You don’t have to attend college to continue your education after high school. There are cheaper ways that are less grueling and more fitted for your lifestyle. If you took a course to learn something new for personal growth or to improve your business, you can write off up to $2,000 per year for you or your spouse.
First Job Expenses
Graduates who are fresh on the job scene will get to tax write-offs for traveling 50 miles or more to their new job location. Moving expenses can be covered along with a dime and a half for every mile traveled, including tolls and parking.
The IRS is fully aware of how expensive health insurance can be, and they allow deductions because of it. Up to 7.5% of your adjusted gross income can be written off. If you are self-employed, you can deduct 100% of health insurance premiums from your insurance.
Miscellaneous Dental and Medical Expenses
Depending on your age and adjusted gross income, you can deduct between 7.5-10% of dental expenses from your taxes.
The cost of contact lenses or glasses or travel costs of dental care can be deducted. Other preventative measures, such as mental health checkups, surgery, and prescription drugs can all be deducted.
Classroom Expenses for Teachers
A teacher who doesn’t occasionally have to dig into their own funds for classroom supplies is completely unheard of. The IRS is sympathetic to this and allows up to $250 worth of write-offs without you having to itemize them.
Your child’s babysitter isn’t cheap! So the IRS allows 20-35% of the cost of childcare to be deducted. However, this only applies when you use childcare for when you’re at work, at school, or looking for a job, and nothing else.
Family members under your care can also qualify as dependents if they meet certain criteria. If their income is lower than $4,000, then you can claim them on your taxes even if they don’t reside in the same home as you.
Sales Tax and State Taxes
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That’s right, you can deduct taxes from your taxes. Deducting sales taxes for big purchases such as buying a car or engagement ring can be a big money saver. If you owed money on your taxes and then paid them before the next tax season, then you can deduct them from the taxes for that year.
Your best defense against paying out more than you should during tax season is through tracking all expenses during the entirety of the year. Some of the biggest deductions will be large purchases in plain sight, but you might miss them if you are not aware of the deduction. It is always helpful to get the assistance of an accountant to make sure you are not losing out during tax season.
If you decide to do your taxes yourself, then always stay up to date on changes or modifications to tax laws and various write-offs you might be eligible for.