Some Overlooked Federal Tax Deductions
If you itemize your deductions, you may be overlooking some federal tax deductions that could reduce your taxes. If you use the standard deduction and don’t itemize, you may be shortchanging yourself. Here are some things to take into account when you itemize your taxes that you may overlook.
Missed Federal Tax Deductions
- State sales tax. If you live in a state with no income tax, you may overlook this federal tax deduction. You can deduct either sales tax or income tax on your return. Usually, income tax is larger, so it’s the better bet. However, don’t forget that you can deduct sales tax, including tax on a car or other large purchase, although you may face limits. The deduction depends on what state you live in, and what your income level is.
- Out-of-pocket charitable contributions. You know that your charitable donations can be deducted, but so can your out-of-pocket expenses. Say you buy stamps for your church’s newsletters, or you buy office supplies for your local shelter. Those count as tax deductions, too. You can also deduct mileage for going to and from your charity to volunteer. If you donate more than $250 in out-of-pocket expenses, you’ll need a receipt from your charity.
- Costs for looking for work. If you spend money looking for a job, you can take the deduction on your taxes. You have to be looking for a job in your same field of work, and the costs can’t exceed 2 percent of your adjusted gross income. Some examples include transportation, food, and lodging if you’re looking out of town, printing costs and postage, agency fees, and other expenses. You can’t deduct expenses if you’re looking for your first job, but you can deduct moving expenses if you have to move to take your first job. Your job has to be at least 50 miles away from your old home to qualify.
- Travel expenses for military reserve members. If you’re a member of the National Guard or other military reserve, and you travel more than 100 miles to your drills, you can take the cost of lodging and half your meals off your taxes. You have to stay overnight to qualify, too.
- Energy-saving improvements. If you added certain improvements to your home that save energy, you can get a tax credit up to 30 percent of the cost of the improvements, with a limit of $1,500. As with all tax deductions, you should talk to your tax professional to find out what deductions apply to you. Use these commonly overlooked federal tax deductions to save money on your tax bill.