Posted by Jim McClaflin, EA, NTPI Fellow

Things You Didn't know You can Deduct On Your Taxes.

Things You Didn't know You can Deduct On Your Taxes.

No one loves the idea of giving Uncle Sam the hard-earned money. However, it is horrible to leave a tax deduction that could bring down your tax bill due to ignorance. As a result, this article explores some deductions people do overlook:


  1. Sales taxes 

One can deduct sales taxes from the federal income tax. For states that do not have their income tax, it is a huge money saver. Even if state taxes were paid, the break from the sales tax would be a better deal if you spend on something huge like a car. The itemizing deduction is the perfect route in this case compared to the standard deduction.

 

  1. Health Insurance Premiums

Uncle Sam is not alien to the fact that medical expenses can mess up any budget. Deductible medical expenses need to be above 7.5% of your AGI (Adjusted Gross Income) for you to claim it as a standard deduction. 

For self-employed people responsible for their health insurance plan, it is possible to exceed 100% of the premium cost. This will be removed from the AGI and not the itemized deduction.

 

  1. Tax Savings directed at Teachers

There are sometimes teachers who need to buy consumables for use in the classroom. While teachers might not get a "thank-you" from anyone, Uncle Sam appreciates this. As a result, qualified K-12 educators can deduct $250 for consumable materials. This will be removed from the income, so you get to benefit from it, even without itemizing.

 

  1. Charitable Gifts

Many taxpayers are aware that goods and money donated to charitable firms can be deducted, even though many hardly take advantage of this. In addition, expenses that are out of pocket for charitable work also qualifies; for instance, making drinks for a charity event, you can remove the cost of the ingredient as deductions. 


  1. Babysitter Bills

Deduction of the cost of the babysitter is possible if you pay her to take care of your kids while you are working, schooling, or looking for work. However, you have to submit the name, tax ID of the person or firm in charge of such care, alongside the location where the care took place. 

Based on the regulation of some states, you might need to submit the contact phone number of the care person. Technically, this is not a deduction, and it is good as it removes the hassle of itemizing deductions. 


  1. Lifetime Learning 

There are several deductions directed at college students, which does not exclude those who graduated already. For example, a Lifetime Learning Credit might give up to $2,000 every year, removing 20% from the first $10,000 spent on education after graduation to boost your learning.

While this does not discriminate with age, the credit phases out at higher income levels.

 

  1. Unusual Business Expenses

Anything that can benefit your business and you can highlight the benefits makes it possible to deduct it from your business income. For example, a bodybuilder can deduct the body oil used in competition, while a magician can deduct the cost of costume used to amuse fans.

 

  1. Seeking for Work

No one wants to face the trauma of losing a job, as getting another job could be complicated and costly. However, for someone looking for a job in a similar field, if you itemize deduction and the expense is above 2% of the AGI (Adjusted Gross Income), whatever qualifying expense you incur over the threshold can be deducted. 

While this might seem too high, the costs could add up quickly. As a result, you can deduct the mileage incurred to drive to interviews alongside what it cost you to print your CVs. While such expenses can no longer be deducted for federal taxes, some states still allow it.


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Jim McClaflin, EA, NTPI Fellow
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