The largest expense an American will pay throughout their lifetime is federal income tax. Many taxpayers, rather than use the services of a professional tax preparer, have taken to tackling the task of preparing their own tax returns, and in so doing have left a lot of their hard earned money in Uncle Sam’s pocket. By overlooking deductions that could greatly cut their tax bill, taxpayers have reduced the amount of money they have to spend on other things. Here are just a few of the deductions that taxpayers regularly overlook.
Student Loan Interest
Generally, personal interest, with the exception of mortgage interest, is not deductable. However, provided a taxpayer’s modified adjusted gross income (MAGI) does not exceed $75,000 ($155,000 if filing a joint return) the IRS will allow them to deduct interest paid on student loans. For qualified student loans that are legally required to be repaid, taxpayers can deduct up $2,500 of interest regardless of who makes the payments. For example, if the parents of a recent college graduate, who has not yet found employment, are making payments on their behalf, the student, not the parents, qualify to deduct the interest associated with those payments.
Costs of Day Camp
For working parents who send their children to day camp, the cost of sending them is eligible for the child-care tax credit. The child-care tax credit grants a credit to taxpayers who pay someone to care for their child or dependent (12 years old or under) so that they can either go to work or look for work. Depending on their adjusted gross income, a taxpayer could receive a credit up to thirty-five percent.
Another little known tax deduction that may benefit many taxpayers is the moving expense deduction. With today’s job market being as competitive as it is many job seekers have found themselves relocating to different areas in order to obtain work. The IRS allows a deduction for a portion of the expenses associated with a job related move. Provided the taxpayer satisfies two basic “test”, they can deduct moving expense whether they itemize or not.
Job Hunting Costs
As many Americans look to find work, they have taken to using different means of trying to land that new job. They have joined professional organization, employed placement agencies, hired resume’ writing services and so on. For taxpayers who itemize these are all eligible deduction. Even the costs of gas and mileage qualify under this deduction.
To find out more about these deductions and many other overlooked deductions, contact us today.