Common Tax Breaks: Ten You Might be Missing
The word “taxes” often conjures up images of Uncle Sam reaching into the pockets of unsuspecting Americans and taking their hard earned income. This negative connotation causes many of us to just get our taxes over with, without giving them our full attention or effort. This may make us feel better, but it is costing Americans a lot of money. Not claiming eligible common tax breaks or tax credits can cost you hundred, if not thousands of dollars.
Here are ten common tax breaks you might be missing out on:
Job hunting expenses.
If you bought paper to print your resume, paid postage to mail it out or used your internet/wifi to search or apply for jobs you can deduct these expenses! Even further, if you had to pay for childcare to go on an interview you can also deduct that. You can also deduct fees paid to an agency, booking for travel and mileage associated with looking for a job. Talk to your tax preparer if you looked for a job in 2016!
Self employment tax deduction.
If you’ve earned more than $400 through self-employment, you must pay self-employment tax. However, you can deduct the “employer equivalent portion” of your self-employment tax to determine your taxable income.
Child and Dependent Care Credit.
If you paid for childcare so that you and/or your spouse could work, these expenses could be claimed as a tax credit (which is different than a tax deduction).
This isn’t a deduction, technically, but it can still save you money come tax time. If you have stock or mutual fund dividends automatically reinvest back into the fund, this increases your tax basis and reduces your capital gains taxes (or increases the tax-saving loss) when you sell them.
Out of Pocket Charitable Donations.
Most people understand the obvious notion that when you write a big check to your alma mater you can deduct that amount. However, even smaller things can help you. If you bought supplies to bake cookies you can deduct the cost from your taxes. You can also deduct the miles put on your car driving to a nonprofit you volunteer for.
Jury fees paid to employer.
Some jobs will still pay their employees when they are on jury duty, but require the employee to pay their per diem jury fee back to them. The IRS views this jury fee as taxable income, but you’re paying taxes on the salary you get. You don’t want to pay taxes on money that only went through your hands into your employers. You can deduct your jury fees that you paid to an employer to avoid that.
When you get divorced, if you make alimony payments to your former spouse you can deduct your payments. You and your spouse must be legally separated and living in separate homes. This rule does not apply to child support, only alimony.
Miles Driven Between Jobs.
If you teach second grade during the day and leave the school to drive to your part time gig at a bar, you can deduct the mileage driven from job 1 to job 2.
Uniforms that you can only wear at work.
This does not apply to normal clothes you buy for work, such as suits and shirts. However it does apply to uniforms and safety items that are only for work.
Tools and Supplies.
If the tools and supplies you bought to do your job are equal or greater than 2% of your taxable income.
This is only ten of the dozens of common tax breaks out there. Tax professionals can help make sure you don’t miss out on any of them, but doing your own homework can be helpful too. If you think you are eligible for a deduction or credit, simply ask you your tax professional! The worst thing that can happen is you’re not really eligible.