Lots of things are hard to find -- such as Sasquatch, the Holy Grail, and the "Inverted Jenny" postage stamp that features an airplane accidentally printed upside down. Other things just seem elusive, such as great tax breaks. In reality, there are lots of tax deductions, credits, and strategies available to us.
Here are three good ways to find great tax breaks you might have missed.
Look them up
You can find great tax breaks in just a few seconds, via a simple online search for "tax deductions" and "tax credits." (Toss in "smart tax strategies" too -- for good measure.) Find lists of them and see which ones apply to you. You may, for example, know that you can deduct mortgage interest, but you might not realize that points you pay when getting a mortgage can also be deductible. You might know that some moving expenses are deductible when you're moving because of a job change, but not realize that some job-search expenses can be deductible, too.
Here's a non-comprehensive list of expenses that can be deductible to start you off:
- State, local, and foreign income taxes and personal property taxes.
- Mortgage interest.
- Points paid when getting a mortgage.
- Mortgage insurance premiums.
- Medical expenses.
- Job-search expenses.
- Moving expenses (when related to a qualifying job change).
- Educator expenses.
- Student loan interest.
- Tuition and fees at a postsecondary school
- Charitable contributions.
- Contributions to qualifying retirement accounts.
- Health insurance premiums (for the self-employed).
- Tax preparation fees.
- Home office expenses.
- Business expenses.
- Casualty and theft losses.
- Investment expenses.
- Professional dues and license fees.
- Uniforms and safety equipment.
Then there are tax credits, which are even better than deductions. A deduction lets you reduce your taxable income. Have taxable income of $75,000 and $5,000 in deductions? Your taxable income is now $70,000. If you're in the 25% tax bracket, you avoid being taxed on that $5,000 and save $1,250. If you have taxable income of $75,000 and a $5,000 tax credit, though, the credit reduces your tax dollar-for-dollar. It's worth a full $5,000.
There are lots of available credits -- for education expenses, energy-efficient home improvements, the adoption of children, the care of children and dependents, and much more. It's well worth spending time learning more about them.
Use tax-prep software
Another way to find great tax breaks you might have missed is to use some tax-prep software. Two that have recently been rated highly are Intuit's TurboTax Deluxe 2016 (for the 2015 tax year) and TaxACT Online Plus 2016 (also for 2015). Each can be found for less than $50 -- sometimes a lot less.
The beauty of using tax-prep software is that the software is aware of the tax breaks that you might qualify for and will guide you through a set of questions to determine which ones you might claim. It's like having an inexpensive tax professional guide you through the process of preparing your return -- a professional who will do all the math for you and fill out all the necessary forms.
Hire a tax pro
A final excellent way to find great tax breaks you might have missed will likely cost well over $50, but is often well worth it: Hiring a tax professional. Don't just hire anyone or go to a random tax-preparer, though. Ask around for recommendations. Consider hiring an "Enrolled Agent," a tax pro licensed by the IRS who is authorized to represent you before the IRS if need be. You might find one through the National Association of Enrolled Agents website. Or find a certified public accountant through your state's CPA society or state board of accountancy.
A good tax pro will very often save you much more than he or she charges you. They will not only be very familiar with tax deductions and credits but they'll also be able to offer some money-saving strategic advice, too. (Oh, and by the way -- the fee you pay a tax pro is deductible, too!)
However you go about it, be sure to take advantage of all the tax breaks you qualify for. Why pay Uncle Sam more than you have to?
Longtime Fool specialist Selena Maranjian, whom you can follow on Twitter, owns no shares of any company mentioned in this article. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.
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