9 Most Common Overlooked Tax Deductions
Tax deductions are a great way to lower your taxable income and in return pay less in taxes to the government. We all know the typical tax deductions like charitable giving but today I’m going to share 9 tax deductions that you are probably overlooking!
Disclaimer: I’m going to share what’s out there but you need to do your own due diligence and talk to your own tax professional. The information and numbers shared change from year to year, be sure to do your own research.
Check out my video for even more details!
1. Open an IRA or HSA
Did you know that you can open an IRA or HSA after the start of the new year to go towards this years taxes? This is really great if you know you are going to have to pay a lot in taxes, you have between January 1st and April 14th to open an HSA or IRA to lower your deductions and invest in your retirement or use it for your health costs. Check out my video explaining HSA vs FSA here. Check out M1 Finance and their IRA options.
2. New Mortgage or Refinance
If you are like myself and purchased a new home last year or refinanced your home, then you are able to write off the origination points. When you first purchase your home you are able to deduct all of the points paid to obtain the mortgage but when you refinance your loan you deduct the points over the life of the loan. To break it down, that means you can deduct 1/30th of the points each year if you have a 30 year mortgage. That breaks down to $33 each year for every $1,000 worth of points paid. It doesn’t seem like a lot but don’t leave money on the table.
3. Charitable Giving
Everyone knows that you are able to write off your donations to religious organizations and places like the Salvation Army. But did you know that you can also write off food and milage? Yep, let me break it down! Say you are making meals for a church or soup kitchen, you can write off the ingredients to make those meals as well as the miles driven to and from the store and to deliver to the location and no you don’t have to own a business to write these items off as long as they are going to an approved 501(c)(3) organization. . Be sure to save your receipts and record your mileage to give to your CPA.
4. Moving for a new job
If you relocated at least 50 miles for a new job then you are able to deduct the mileage from your taxes. Starting in 2018 if you are moving due to military orders then you can also deduct your moving costs.
5. Childcare Services
If both parents are working you are able to deduct childcare services. In addition to normal daycare costs throughout the school year you are able to deduct summer camps and sports camps because if both parents are working that is considered childcare. Also look into your FSA, you can also pay for your childcare costs through your FSA for additional savings.
6. Energy Savings Upgrades
If you made some energy saving upgrades to your home then you are able to write those off. Did you replace your windows, install solar panels, buy new energy saving appliances or other energy saving improvements this past year? You could get a tax credit for up to 10% of the purchase price of qualified products, up to a maximum of $500 per year.
This also includes if you purchased a smart car, depending on the vehicle, beginning on January 1, 2019 the IRS is issuing a tax credit for $2,500 to $7,500 per new electric vehicle.
7. Sales Tax
This was a surprising one to me, did you know that you can deduct your sales tax on large purchases throughout the year? You all know that I bought my dream car in cash a year ago and you better believe I wrote off the sales tax on it! Most people will only take the time to deduct the tax on large purchases but if you save your receipts throughout the year there is a deduction limit of $5,000 per year. We all know that we pay more than $5,000 in sales tax throughout the year, it pays to save those receipts (and keep track in an Excel spreadsheet)!
8. Rent Your Home Tax Free
Renting out your home on places like Airbnb has been such a popular way to bring in some extra money, especially if you have some extra rooms or will be traveling yourself. Who doesn’t love to get paid while they are on vacation?! But did you know that you can you can rent your home on sites like Airbnb for up to 14 days a month and you don’t have to pay taxes on that income?! I’m not talking rental properties but your own personal home, such a cool and unique tax deduction!
9. State Tax From LAST Year.
If you have to file a state income tax be sure to put it on this year’s taxes. Once you calculate the deduction, you must report it in the “taxes you paid” section of Schedule A, but keep in mind that your state tax refund may be taxable on the next federal return you file. If you live in Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington or Wyoming then you do not have to pay state income tax.
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