Like most Americans, you probably want to get through your taxes as quickly as possible. However, do not rush through your return so quickly that you simply take the standard deduction and ignore deductions that can bring you a healthy refund. Consider these commonly overlooked tax deductions.
1. Charitable Contributions – You may not feel that you give enough to charity for it to matter, but every little bit helps when itemizing deductions. Any gift to a qualifying charitable organization may be deducted. The IRS website has an online search tool to verify qualified status of any organization, but the receiving organization should be able to provide you with proof.
Make sure that you have written receipts or bank/payroll deductions for any contributions. Any non-cash donations such as clothing have to be deducted at fair market value. If your non-cash deductions are over $500 for the year, you must submit IRS Form 8283 with your taxes to claim your deduction. See IRS Publication 526, "Charitable Contributions", for further details.
2. Retirement Plan Contributions – Contributions to traditional IRAs and Simplified Employee Pension plans (SEPs) may be deductible. Roth IRA contributions are not deductible because they are made with after-tax dollars. You can still make contributions up to the tax filing date and apply them to the previous tax year as long as your total contributions are below the annual limits. See IRS Publication 590-A, "Contributions to Individual Retirement Arrangements," for details.
3. Mortgage Interest and Points – The annual interest on your mortgage is deductible, along with any points paid on a new home to lower your interest rate. Generally, deductions for points must be spread out over the life of a loan, but there are a few exceptions that allow total deduction in the year of purchase. Further information is available in IRS Publication 936, "Home Mortgage Interest Deduction."
4. Mortgage Insurance Premiums – If your mortgage includes private mortgage insurance (PMI), your PMI premiums may be deductible. Above an adjusted gross income (AGI) of $100,000 ($50,000 if your filing status is married filing separately), you can claim a partial deduction based on a worksheet in the Instructions for Form 1040, Schedule A. You cannot take this deduction at all with an AGI above $109,000 or $54,500 if married filing separately.
5. State and Local Taxes – Various state and local taxes paid in 2016 can be deducted, either as income taxes or sales taxes paid (but not both). Generally, state income tax is higher, but not all states have an income tax. If you choose to deduct sales taxes, use the relevant tables in the Schedule A instructions to determine a baseline deduction amount, and then add the sales tax component of any big-ticket items purchased.
6. Personal Property Taxes – You can deduct any personal property taxes that are paid on items such as automobiles or boats as long as the taxes are imposed annually and based on the value of the asset.
7. Job Search Expenses – Some job-hunting costs can be deducted if you are looking for a job within your occupation with no time break between the job search and your previous job. Things like transportation costs with associated food and hotel bills, resume printing costs, and employment agency fees are deductible in that case.
8. Moving Expenses – If you get that new job, you can deduct moving expenses as long as your new job is at least fifty miles farther from your old home than your old home was from your old workplace (or from your old home if you had no prior job). This deduction is especially valuable since it is an "above-the-line deduction" that directly lowers your AGI. You can take the deduction whether or not you itemize.
Maximize your Tax Refund
Take the time to look over these and other potential tax deductions. They could be the difference between a good refund and a great one.
This article was provided by our partners at moneytips.com.
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