It’s that time of year again where we scramble to get all of our tax documents together, organized, and pray that we don’t owe a whole bunch of money to the IRS! Surprisingly, many people forget to claim all the deductions and credits that they’re eligible for which means they are giving the IRS extra money that they don’t really owe. So whether you file your taxes yourself or you pay for someone else to do it, make sure you take advantage of all the deductions and credits out there.
Education & Child Care
1. Tuition – The maximum you may deduct for any tuition or fees you paid in 2016 is $4,000 depending on your income. You may claim this for anyone you claim on your tax return including yourself, your spouse, or any dependents.
2. American Opportunity Credit or Lifetime Learning Credit – In 2016, there are two tax credits you can potentially take advantage of to help offset the cost of higher education. For each student you can only pick one of the credits. For example, if you and your spouse are attending college classes you can choose the American Opportunity Credit and your spouse may claim the Lifetime Learning Credit but you each cannot choose both. To see if your eligible, you can read more on the IRS website.
3. Student Loans – Whether you have private or federal student loans, you may deduct up to $2,500 of interest paid on those loans each year.
4. College Savings Accounts (529 Plans) – I love our 529 Plan for our kids but unfortunately in Texas I do not get a deduction for my contributions. However, many states do offer a deduction. Look up your state here to see if you qualify.
5. Child Care – If you had child care expenses such as daycare, or paying a sitter so you could pursue employment, your child care expenses are eligible for a credit up to $3,000 for one child or $6,000 for two or more children. The credit amount depends on your income but hey, a credit is a credit. It’s not lowering your taxable income but more so giving you money directly back.
6. Property Taxes – Owning your own home usually means you have to pay taxes on the property you own as well, but this is an expense you can deduct. You can look at your mortgage interest statement if you escrow your property taxes or look up your receipts on your county’s property tax website.
7. Mortgage & Home Equity Loan Interest – Any interest you paid on your mortgage or on a home equity loan or line of credit is tax deductible up to a principal amount of 1 million.
8. Primary Mortgage Insurance (PMI) – This isn’t homeowner’s insurance but rather the insurance that some lenders require you to take on your home if you have less than 20% equity in your home. This will be on your mortgage tax statement as well.
9. Points – When you buy a new home one of the loan options is to pay points in exchange for a lower overall interest rate on the loan. These points are deductible. You can also pay points when you refinance your loan but instead of taking all the points at once, refinancing requires you to spread the deduction over the life of the loan. Regardless, you get a tax deduction!
10. Energy-Saving Upgrades – If you installed solar panels, solar-powered water heaters, exterior doors or windows, or other improvements such as adding insulation to your home, these can all qualify you for a tax credit. To read the full list of what is eligible, click here.
11. Medically Necessary Upgrades – If you renovated your home to accommodate your disability such as widening doorways, installing a ramp, modifying your bathroom, or whatever the upgrade may have been, can be deducted from your income as medical expenses. To see the full explanation, click here.
12. Medical, Vision & Dental Expenses – With three kids this one is really a pain in the ‘tookus for me because it seems someone is always catching a virus or needing a cavity filled or something and I can never quite meet the amount required to exceed the certain percentage of our adjusted gross income. In 2016 these expenses must exceed your AGI by 10% or more (7.5% or more if you’re 65 or older) in order for you to deduct them. If you have a lot of medical expenses, or feel like you do (like me), be sure to include them to find out whether you qualify.
13. Self-Employed Health Insurance – If you were self-employed in 2016 and paid your own health insurance premiums, don’t forget to deduct the expense.
14. Medicare Premiums – If you’re paying for Medicare, your premiums are tax deductible as long as they exceed 7.5% of your AGI. Also allowable deductions are coinsurance and deductible amounts paid out of pocket. For more information, click here to see AARP’s explanation.
15. Donating Goods – Many of us purge our closets and household goods about once a year, and if you give those to organizations such as Goodwill or the Salvation Army, you can claim a deduction for the fair market value of those items. Just don’t forget your receipt! If you are ever audited, they will not let you go back after the fact to get a receipt.
16. Cash Donations – Whether you tithe to your Church or give cash to your alumni organization, cash is deductible up to 50% of your AGI. Again, you need documentation so be sure to keep all this with your tax records.
17. Volunteer Expenses – You cannot deduct your time or services however you can deduct expenses you incur for volunteering. That can be expenses such as travel or lodging if proved necessary in order to volunteer your time.
Professional & Work Related Expenses
18. Subscriptions – If you subscribe to a professional journal or trade publication for work purposes, these expenses can be reimbursed.
19. Work Uniforms – If you are required to purchase your own work uniforms, and they cannot be worn out as normal clothing, you are able to deduct your expense for the purchase.
20. Teacher Expenses – If you are an eligible educator, you may deduct up to $250 a year for eligible expenses.
Other Common Deductions
21. Retirement Contributions – If you contribute to any tax deferred retirement account such as a traditional IRA, 401(k), 403(b), SEP, or SIMPLE IRA, you can deduct your contribution amount assuming you qualify based on your income.
22. Asset Management Fees – If you pay an advisor to manage your assets for you, you may be able to deduct your fees.
23. Tax Preparation Fees – Likewise, you may be able to deduct the fees you pay in order for someone to prepare your taxes.
24. Alimony – If you pay alimony to an ex-spouse, this does not include child support, you are able to deduct your alimony payments.
25. Legal Fees – If you paid legal fees for any tax-related legal advice, these can be deducted as well.
This list doesn’t include everything out there available, but it certainly covers the many that I see people forget about all too often. Keep in mind that some of these deductions and credits are only obtainable based on your income. Nevertheless, if any of these apply to you, be sure to ask about them to find out whether you are eligible. Here’s to a hopefully easy and painless tax season!
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