Overlooked Federal Income Tax Deductions
For taxpayers who itemize, it’s crucial to find every possible federal income tax deductions. The more tax deductions a taxpayer qualifies for, the lower the tax burden or the higher the refund amount. Deductions that are overlooked are the same as lost money. Here are some of the most common federal income tax deductions that are overlooked, according to tax experts:
- Educator’s expenses. The deduction is only $250, but every amount helps. Both teachers and assistants qualify for this deduction, which is available whether or not the taxpayer itemizes deductions.
- Student loan interest paid by parents. If your parents paid off all or part of a student loan, that money is classified as a gift by the IRS. If the child is not claimed as a dependent by the parents, it’s possible to deduct up to $2,500 of interest on student loans that are paid by parents.
- State sales taxes. Taxpayers have the choice of either deducting state income taxes or sales taxes. Because the majority of states have income taxes, the sales tax deduction is a much better deal for most taxpayers.
- Job moving expenses. This only relates to a taxpayer’s first job. Remember that the trip taken to hunt for the job cannot be deducted, but once the job is offered and the taxpayer moves at least 50 miles away to take that job, the moving expenses are tax deductible.
- College tuition. Because of the two high-profile tax credits offered for higher education payments, the deduction for college tuition is one of the most overlooked federal income tax deductions. Either the parent or student – whoever is paying for the college tuition – can claim a deduction of up to $4,000 in the event they do not qualify under the income guidelines for either the American Opportunity Credit or the Lifetime Learning Credit.
- Noncash charitable giving. It isn’t uncommon for some taxpayers not to keep track of furniture, clothes or other items given away to charity. Cash giving is easy to track and remember. However, most nonprofits that accept charitable donations will pick up property donations and leave forms that taxpayers can use to record pertinent information about what was donated.
- Points on a loan refinancing. This is another of the most commonly overlooked federal income tax deductions. Points and costs involved in the original purchase of a home can be deducted, but the same is true for points involved with the refinance of a home. The only catch is that the points have to be deducted over the life of the mortgage – often 15 or 30 years.