Ten Commonly Overlooked Deductions
Don’t forget these ideas to lower your taxes
The tax code is about 75,000 pages long, so it’s not surprising there are many overlooked money-saving deductions hidden within it. Check out this list of commonly overlooked deductions. You might wind up with a bigger refund than you expected.
- State sales tax alternative
You can choose to deduct state and local sales taxes rather than state income taxes on a tax return using itemized deductions. This is especially useful for residents of states that don’t have state income taxes. It can also be used if you made enough purchases during the year that your state sales tax deduction is larger than your state income tax deduction.
- Mortgage discount points
When you buy a home you can generally deduct the cost of mortgage “discount points” to lower your interest rate. A point is a fee equal to one percent of the mortgage amount and it lowers your mortgage’s interest rate. When you refinance a mortgage, you spread the cost of your points over the life of the mortgage. Many taxpayers forget that when they sell their home they can immediately deduct the remainder of the points not yet used as a deduction.
- Job-hunting costs
Expenses for the purpose of finding a new job in your current occupation are generally tax deductible. You can usually deduct fees paid to recruiters or placement agencies. Deductions also include the costs of printing materials, postage, preparing resumes, and travel expenses.
- Student loan interest
You can deduct up to $2,500 in interest paid on student loans from your tax return. This is true even if someone else helps you pay your loans. Parents who have co-signed student loans (creating legal obligation for the debt) often forget that they are also now eligible for the deduction on payments made by them.
- Alimony legal fees
While most people who pay alimony know it is tax-deductible, fewer know you can also deduct money you spend on your alimony agreement, such as attorney fees. Make sure your lawyer breaks out the amount spent on the alimony agreement from the amount spent on the divorce, which is not deductible.
- Casualty and theft losses
Amounts lost to theft or catastrophes (such as fires or earthquakes) can be deducted from your tax return. The timing of taking the loss and the amount of the qualified loss can get complicated, so ask for help if you think it applies to your situation.
- Occupational education
If you are required by law or by your employer to take continuing education courses, or if you can show you need to take courses to maintain or update your skills in your current occupation, you can often deduct those costs.
- Professional subscriptions
Expenses for trade magazines, professional journals or digital subscriptions relevant to your profession can be deducted as an itemized deduction.
- Advisor fees
Fees for investment management or financial advice on income-producing investments can be deducted from itemized returns. This includes your tax preparation fee.
- Small business tax breaks.
There are a number of special business incentives built into the tax code. This includes special depreciation rules to the now-permanent research credit. A deduction even exists for domestic production of qualified products.
As with any part of the tax code, certain qualifications must be met and limits apply. Please feel free to ask for help if you think any of these ideas apply to you.