3 Expenses You Might Think You Can Deduct on Your Taxes -- but Can't
- Deductions exempt a portion of your income from taxes.
- While there are plenty of legitimate deductions you can claim, here are a few to be careful with, including commuting costs.
Don't claim bogus deductions. It could get you into trouble.
No matter how much money you earn, your goal should be to legally pay the IRS as little money in taxes as possible. And to achieve that goal, it's important to be savvy about claiming the right deductions.
There's a host of deductions you may be entitled to claim on your tax return. If you own a home, for example, you can commonly deduct interest on your mortgage if you itemize, and you may be able to deduct some or all of your property taxes. You can also deduct qualified medical expenses that exceed a certain amount of your adjusted gross income.
But it's important to know what tax deductions you are and aren't entitled to. Claiming the wrong ones could make it so your tax return gets audited, and that's not a situation you want. Here are three deductions you might think you can claim -- when you actually can't.
1. Donations to individual fundraisers
Sites like GoFundMe make it easy to set up fundraisers to benefit individuals who need help. And to be clear, it's a great thing to support those fundraisers when the cause is meaningful to you and you can swing it financially.
But one thing you should know is that you can only deduct donations to a registered charity on your taxes. If you donate to a neighborhood child's medical fund, you won't be able to write off that sum because that child is an individual, not a registered charity.
Similarly, you might donate to your neighbor's kid's soccer team fundraiser, and that's a nice thing to do. But if that soccer team is not a registered charity, then you can't deduct your contribution on your tax return.
2. Commuting costs to your job
If you work as a salaried employee, it's on you to absorb the cost of getting to and from the office. As such, you cannot take a deduction for commuting expenses on your taxes.
Things are different, though, if you're self-employed. In that case, if you incur travel expenses to visit clients or perform your work, you are entitled to deduct them on your taxes as a business expense.
3. A home office
Many people have been working remotely in the wake of the pandemic. If you're self-employed, you can claim a home office deduction if you have a dedicated space within your home that's used solely for work purposes, and if that space is your primary place of work. But if you're a salaried worker, you can't claim a home office -- even if that's where you work 100% of the time and you have a room in your home used strictly for work purposes.
Know what tax breaks you're entitled to
It definitely pays to claim every tax break you're eligible for in an effort to pay the IRS less. But it's also important not to claim tax breaks that aren't legitimate. If you're not sure, it could pay to enlist the help of a tax professional so you don't make a mistake that gets your tax return audited.
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