- Days left

Eight Commonly Overlooked Tax Deductions

Are you missing out on these eight overlooked tax deductions?If you keep good records, deductions can be a great way to reduce your taxable income. Increasing your allowable deductions means the less tax you owe and the more money you get to keep.

To maximize your deductions, it's a good idea to familiarize yourself with tax rules -- there are likely many deductions you're missing out on.

A number of deductions that get overlooked quite a bit are called "deductions subject to the 2% limit." These deductions are only deductible to the extent that they are more than 2% of your adjusted gross income (AGI). You figure your total deductions subject to the 2% limit on Schedule A by subtracting 2% of your AGI from the total amount of these expenses. For example, if your AGI is $40,000, your deduction would be limited to those expenses over $800 (2% of $40,000).

To get you started, here's a list of eight commonly overlooked tax deductions subject to the 2% limit:1. Job Hunting Expenses. While you can't deduct the cost of looking for your first job (sorry, new grad!), you can deduct out-of-pocket expenses related to your job hunt if you've been laid off or are simply moving on. This includes paper, printing and stamps for your resume; online expenses to post your resume; fees paid to employment agencies; travel to and from interviews; long distance calls to prospective employers; and the costs of getting a portfolio or other work samples together. You must be looking for a job in the same profession -- you cannot deduct the cost of looking for a job in a new profession. You also can't deduct job expenses if there has been a "substantial break" between leaving your last job and starting to look for a new job. You don't have to have success within a reasonable amount of time, but you do need to be looking.

2. Licenses and Regulatory Fees. You can deduct the amount you pay each year to state or local governments for licenses and regulatory fees for your trade, business or profession. This is good news for everyone from manicurists to attorneys who have to pay annual fees to stay in business.

3. Appraisal Fees. You can deduct the cost of appraisal fees if you pay them to figure a casualty loss or the fair market value of donated property for charitable purposes.

4. Tax Preparation Fees. You can claim a deduction for out-of-pocket expenses paid for tax preparation software, tax publications and the costs associated with electronic filing. Those expenses would be deducted in year paid, not necessarily for the year of the return (for example, fees paid in 2011 would be reported on your 2011 return, not your 2010 return).

5.
Investment Fees and Expenses. You can also deduct investment fees, custodial fees, trust administration fees and other expenses you paid for managing your investments that produce taxable income.

6. Safe Deposit Box Rent. As with investment expenses, you can deduct safe deposit box rent if you use the box to store taxable income-producing stocks, bonds or investment-related papers and documents. You cannot deduct the rent if you use the box only for jewelry or other personal items like birth certificates.

7. Legal Fees Associated With Tax Advice. Generally, individual taxpayers cannot deduct ordinary legal fees. However, you can deduct legal fees to determine, contest, pay or claim a refund of any tax. It makes paying a lawyer a little less painful.

8. Credit Card Fees Used to Pay Taxes. You can deduct the convenience fee charged by your bank or third party processor when you pay your income tax (including those pesky estimated tax payments) by credit or debit card. The fees are deductible on the return for the year in which you paid them. That means fees charged to payments made in 2010 can be claimed on the 2010 tax return.

Don't miss out on tax breaks you might be entitled to, especially when it comes to little-known deductions. With a bit of research (or the help of a paid preparer or software package), you can maximize your deductions and keep more of your money from Uncle Sam.

Increase your money and finance knowledge from home

Economics 101

Intro to economics. But fun.

View Course »

Banking Services 101

Understand your bank's services, and how to get the most from them

View Course »

TurboTax Articles

What is IRS Form 8824: Like-Kind Exchange

Ordinarily, when you sell something for more than what you paid to get it, you have a capital gain; when you sell it for less than what you paid, you have a capital loss. Both can affect your taxes. But if you immediately buy a similar property to replace the one you sold, the tax code calls that a "like-kind exchange," and it lets you delay some or all of the tax effects. The Internal Revenue Service (IRS) uses Form 8824 for like-kind exchanges.

What are ABLE Accounts? Tax Benefits Explained

Achieving a Better Life Experience (ABLE) accounts allow the families of disabled young people to set aside money for their care in a way that earns special tax benefits. ABLE accounts work much like the so-called 529 accounts that families can use to save money for education; in fact, an ABLE account is really a special kind of 529.

What is IRS Form 8829: Expenses for Business Use of Your Home

One of the many benefits of working at home is that you can deduct legitimate expenses from your taxes. The downside is that since home office tax deductions are so easily abused, the Internal Revenue Service (IRS) tends to scrutinize them more closely than other parts of your tax return. However, if you are able to substantiate your home office deductions, you shouldn't be afraid to claim them. IRS Form 8829 helps you determine what you can and cannot claim.

What is IRS Form 8859: Carryforward of D.C. First-Time Homebuyer Credit

Form 8859 is a tax form that will never be used by the majority of taxpayers. However, if you live in the District of Columbia (D.C.), it could be the key to saving thousands of dollars on your taxes. While many first-time home purchasers in D.C. are entitled to a federal tax credit, Form 8859 calculates the amount of carry-forward credit you can use in future years, not the amount of your initial tax credit.

What is IRS Form 8379: Injured Spouse Allocation

The Internal Revenue Service (IRS) has the power to seize income tax refunds when a taxpayer owes certain debts, such as unpaid taxes or overdue child support. Sometimes, a married couple's joint tax refund will be seized because of a debt for which only one spouse is responsible. When that happens, the other spouse is said to be "injured" and can file Form 8379 to get at least some of the refund.

Add a Comment

*0 / 3000 Character Maximum