Every year, millions of dollars in tax deductions and credits get overlooked, and many taxpayers don't get the full refunds they are entitled to.
Now that tax season is right around the corner, here are five commonly overlooked tax breaks you should make sure you don't miss.
1. Did you move?
Many people don't realize that moving expenses are tax deductible, as long as the move was job-related. Now, this doesn't necessarily mean you have to have a job lined up before you move. According to the IRS, your move needs to pass two "tests" in order to qualify for the deduction.
First, the "time test." If you move to a new location and work 39 weeks in the first 12 months following the move, you qualify. In other words, since there are 52 weeks in a year, you have up to 13 weeks after you move to find and start a new job.
Also, your move must pass the "distance test." Your new job must be at least 50 miles further from your old house than your old job was. In other words, you can't just move 20 miles away because you got a new job and take the moving expenses deduction. However, if your old job was 10 miles from your house, and the new job is more than 60 miles from your old house, you should qualify.
For a more thorough description of the moving expenses deduction, the IRS provides a thorough description of all of the rules and conditions.
2. State sales tax
This can be a big one (potentially $1,000 or more), especially if you live in a state that has no income tax.
The IRS allows you to deduct the higher of your state income tax or the state sales tax you paid throughout the year. If your state has income tax, the former is generally the higher of the two, but for those taxpayers with no state income tax to pay, it should be a no-brainer.
And, you don't need to save every single receipt throughout the year in order to take the deduction. The IRS provides tables that show how much of a deduction you can take, and there is a sales tax deduction calculator you can use to get an idea of what size deduction you can expect.
3. Small charitable deductions can really add up
Most people remember to deduct their large charitable contributions, but many don't bother to keep track of the small ones.
For example, did you buy supplies so your child's class could hold a fundraiser? Did you buy food for a local homeless shelter? Or, do you always hit the "donate $1" button when you check out at the grocery store? These are just a few examples of charitable contributions you can use to lower your taxes. And you may be surprised at how much they add up over the course of a year.
4. Education deductions are bigger than you may think
It is a pretty common misconception that only college students can use their tuition and expenses to qualify for deductions and credits. However, the tuition and fees deduction is much broader than that.
If you take even one course at an eligible institution (pretty much all U.S. postsecondary institutions, according to the IRS), you can deduct your qualified expenses. This includes tuition, fees, as well as required books and supplies in some circumstances.
5. Did you look for a job last year?
The IRS allows you to deduct expenses incurred during a search for a new job, as long as certain conditions are met.
One requirement is that the job you are looking for is in the same occupation as your current, or previous job. You can't be looking for your first job, and you also can't have a "substantial" break between your last job and when you begin looking for a new one.
As long as your job search qualifies, you may be able to deduct certain expenses such as employment agency fees, expenses associated with producing and distributing resumes, and travel expenses (as long as the trip was for the purpose of finding a job).
While these deductions are overlooked rather often, this is by no means an exhaustive list. If you really want to maximize your tax deductions, you may want to invest in a comprehensive book of tax deductions. It shouldn't cost you more than $20 and a few hours of your time to skim through it, and it could more than pay for itself if you find even one extra deduction.
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