It important when dealing with the IRS to make every effort to lower your tax burden, however, you must stay within the guidelines that are laid out in the tax laws of your state and the United States Statutes. Some taxpayers are missing some of the deductions due to them. Research has shown that the biggest mistake they make when completing their return is their social security number. The tax laws are complicated and there are so many deductions, it makes your head spin. Here are some commonly overlooked deductions:
State Sales Tax is deductible and especially welcome in the states with no state income tax. You must chose to deduct the state income tax or the sales tax. You cannot do both. There is an IRS table and calculator to figure your deduction, at their website. This is especially helpful when you have large purchases during the year such as car, major remodeling along with all the new appliances, boat etc.
Reinvested Dividends – check with the mutual fund company to determine your taxable capital gain changes.
Out of Pocket Charitable Contributions can add up quickly. Keep your receipts from donating foods to charity, or ingredients to a fundraising event raising funds for charity.
Student Loan Interest paid by Parents The IRS treats the payback money from parents as a gift to the child and you may deduct up to $2,500 of a qualified student loan interest paid by parents. All of the following must apply for this deduction: You paid interest on a qualified student loan in the tax year 2011. You are legally obligated to pay interest on a qualified student loan. Your filing status is not married filing separately. Your modified adjusted gross income is less than a specified amount, which is set annually. You and your spouse, if filing jointly, cannot be claimed as dependents on someone else’s return.
Job Hunting Expenses are deductible not to exceed 2% of your adjusted gross income. If you are looking for the same kind of job you had before being laid off, you can deduct job-searching costs as a miscellaneous expenses on your itemized tax return. The allowable deductions are food, lodging, transportation if search takes you away from home overnight, cab fares, employment agency fees, costs of printing resumes, business cards, postage and advertising. You must itemize to get this deduction. These expenses are deductible even if you do not find employment.
Cost of Moving for your first job is deductible if the move is more than 50 miles away from home. The deduction includes the cost of getting you and your household goods to the new location. If you drive your own car deduct your mileage as well. If you are a member of the armed forces and your move was due to a military order and permanent change of station, you do not have to satisfy the “distance or time tests.” You must use Form 3903 to figure your moving expense deduction. You can deduct your un-reimbursed moving expenses.
Military reservists’ travel expenses are deductible when traveling more than 100 miles away from home for meetings and drills. You may deduct one half of meals and lodging. You are not required to itemize with this deduction.
New Deduction for Medicare Premiums is the latest deduction of interest to sole proprietors; partners, limited liability company members and S corporation shareholders can deduct qualified health insurance premiums paid to cover themselves and family members. This is the so-called self-employed health insurance deduction, which includes Medicare Part B premiums. As a bonus, you can subtract your self-employed health insurance premiums (the amount claimed on Line 29 of Form 1040) from the self-employment income when calculating your self-employment tax bill.