5 Tax Deductions That Are Typically Overlooked

Are you missing out on these not-so-obvious ways to save money at tax time?

Mar 30, 2014 at 3:30PM

There are literally hundreds of ways you can use tax deductions to decrease your overall tax burden. Unfortunately, many people don't even know these deductions exist, missing out on thousands of dollars in potential savings each year.

First, it's important to actually remember to file your tax return -- you have until April 15 to do so, or you'll face a late filing penalty. You may also miss out on the opportunity to receive a refund. In 2009, the IRS got to keep more than $917 million in refunds, since nearly 1 million taxpayers didn't file their tax returns.

Tax deductions go much further than charitable donations and mortgage interest. Here are five things that you probably didn't know were tax deductible.

1. Fees and costs to actually do your taxes
The IRS allows you to deduct the cost of preparing your taxes as a miscellaneous itemized deduction, on the return for the year in which you pay them. For example, if this year you spend $300 to prepare your tax return for 2013, you would be able to deduct $300 for your 2014 return.

This includes the cost of tax preparation software programs, such as H&R Block or TurboTax, any fee you pay for the electronic filing of your return, tax planning advice, the cost of tax-related books or materials, legal advice, fees for a tax audit, and more.

2. Losses from Ponzi-type investment schemes
The phrase "Ponzi scheme" has unfortunately become well known to the public following the Bernard Madoff scandal in 2008, as thousands of taxpayers were affected.

Thankfully, the IRS does offer some relief to the victims of Ponzi schemes.

Added in 2009, the IRS says you can claim a "theft loss due to a Ponzi-type investment scheme" on Form 4684. Taxpayers claiming a loss should mark "Revenue Procedure 2009-20" at the top of the form.

3. Gambling losses
While all gambling winnings are fully taxable and must be reported on your taxes, gambling losses can be deducted.

You can deduct gambling losses only if you itemize deductions. However, the IRS says that the amount of losses you deduct "may not be more than the amount of gambling income reported on your return." In other words, losses cannot exceed winnings.

For example, you win $10,000 at the slots machines in Las Vegas, but then end up losing $8,000 on the craps tables. You must still count $10,000 of income on your 1040, but you can write off the $8,000 in losses on a Form 1040, Schedule A on Line 28.

It's important to keep good records of both your gambling winnings and losses, from the date and location to the amount you won or lost. Make sure to keep all your receipts, because it's possible you might have to provide records to be able deduct your losses.

4. Car expenses for business, medical, moving, and charitable service
If you use your car in your job or business, you might be able to deduct its "entire cost of operation," from mileage, parking fees and tools, vehicle registration, gasoline, car repairs, and more.

The IRS says you can use a standard mileage rate to figure out your deduction, although you can also calculate the actual costs of using your vehicle instead. It depends on whether you think your calculation of the actual costs will be higher than the standard mileage rate.

For 2014, the standard mileage rate is 56 cents per mile for business use. So if you commuted 5,000 miles for work purposes, you'd be able to deduct up to $2,800.

For medical and moving purposes, the standard mileage rate is 23.5 cents per mile driven, and for charitable organizations, the mileage rate is 14 cents per mile.

5. Job search expenses
Did you look for a new job in 2013? You may be able to deduct the costs of your job hunt.

First, the IRS says that your expenses must be spent on searching for a job in your current occupation -- you cannot deduct expenses while looking for a job in a new occupation. So if you're a nurse looking for a job as a teacher, you're out of luck.

Next, it's important to know that you can deduct expenses on employment and outplacement agencies, the amounts you spend for preparing and mailing copies of your resumes, and the cost of travel to and from the job.

You can also deduct your job search expenses if there was a "substantial break" between the end of your last job and the time you began looking for a new one.

Finally, your education expenses during unemployment may be tax deductible, if you stop working for a year or less for your education.

Other overlooked tax deductions

  • Depreciation on home computer used for investments or on a computer your employer requires you to use in your work.
  • Cost of a passport for a business trip.
  • Union dues and expenses.
  • Business gifts up to $25.
  • Medical expenses: The IRS allows only for the portion of expenses over 10% of your adjusted gross income.

Read more from NerdWallet:


Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers