Every taxpayer wants to reduce their taxable income as much as possible. Tax deductions allow taxpayers to deduct certain expenses in order to reduce their tax liability. Although most taxpayers are aware of common deductions, such as medical and dental expenses, home mortgage points, interest expenses, and employee business expenses, there are some tax deductions that go unnoticed. Here are some tax deductions that tend to fall under the radar.
Most taxpayers are familiar with tax deductions for charitable contributions that are made by check or through payroll deductions. But many times taxpayers pay small, cash amounts to charities that go unaccounted. To get a tax benefit for these smaller contributions, taxpayers need to ask for a receipt from the organization in order to have proof of the claimed deduction when filing.
Apart from cash contributions, you can claim contributions of merchandise, goods or services, including admission to charitable functions. For these, taxpayers will need to complete Form 8283 Noncash Charitable Contributions and attach it to your tax return if you claimed a total deduction over $500 for all contributed property.
Tax deductions for educational expenses are not just for students. They can be claimed if a taxpayer's work involves research.
Apart from commonly claimed deductions, such as tuition fee and supplies, there are other tax deductions involving educational expenses that go unseen. One such deduction is for work-related education. Taxpayers can claim this deduction if the courses taken relate to their current career, even if the educational expenses are incurred during an absence from their job. Absence from work up to one year or less qualifies.
Educational expenses include transportation and travel costs, research, tuition, books, supplies, and other fees. Taxpayers cannot claim both education deductions and credits; therefore, they will need to choose the ones that give the biggest benefit to their tax liability.
Taxpayers can pay their income taxes electronically through a credit or debit card. Convenience fees associated with the payment of federal taxes and estimated taxes can be included as miscellaneous itemized deductions. Please note that this deduction is not available to those taxpayers who use the standard deduction.
Only miscellaneous expenses that exceed 2 percent of a taxpayer's AGI can be deducted. Taxpayers who are eligible to file Form 1040 Schedule A are eligible for this deduction as well.
Smaller, lesser known deductions are often missed by taxpayers because they are not aware of them, resulting in a loss of money in either their refund or their tax liability. To get the maximum benefit from tax deductions, taxpayers should look for smaller deductions apart from the well advertised ones.