A lot of people are unknowingly overpaying their taxes. Sometimes it is as simple as claiming a deduction that you may not be aware of. In this article, we have listed five easily overlooked deductions that you may be able to claim.
Out-of-the Pocket Charitable Deductions
If you are giving to charity, you may be able to claim these as deductible charitable contributions. You can deduct up to 50 percent of your adjusted gross income for cash and property donations over $500. However, not all charities qualify. If you donate to a college, a private school, or a church, then you can deduct up to 100 percent of your adjusted gross income. If you are in the habit of donating large amounts to any charity, then you should consult a tax professional to find out the best way to go about making your deduction.
If you purchase a mutual fund, then you may be unknowingly overpaying taxes because of the way your broker does it. When dividends are distributed, the broker may just automatically reinvest them. This means that you are not taking full advantage of your dividend reinvestment credit.
If you purchase a share of a mutual fund for $20, then your broker subtracts out the 7 percent dividend. This means that you are overpaying taxes by $1.40. Instead, you can reinvest the dividends at no charge and the money will compound into more money in the next year.
State Sales Taxes
This is a simple but very easy to overlook deduction. If you drive a lot, it can be hard to keep track of all the taxes you pay. For example, the average driver in California spends $1,995 per year on vehicle expenses. This includes gas, car maintenance, and insurance. If you live in a state that collects sales tax on these, then you can list these as itemized deductions. This can save you a significant amount of money.
Did you know that you can claim moving expenses if you moved because you got a new job? You can deduct the costs of moving and storing your belongings if you itemize your deductions.
If you work for the federal government, you can also claim moving expenses. Moving expenses are not limited to just yourself. If you are moving due to a job change and you have family members that you are bringing with you, you can claim deductions for your whole family’s moving expenses. However, you cannot claim your relocation on behalf of your family if you are moving for educational purposes.
If you are in the military, you can claim the expenses you paid for stateside moves. This includes the price of fuel and tolls. You can also deduct the costs of moving a vehicle. It does not matter whether you are moving to your first duty station or not.
Student Loan Interest
If you paid interest on a student loan in the past or do currently, you can claim a deduction. This includes the interest you paid on a loan taken to pay for your education. This can be a valuable deduction if you are paying back a loan that is high in interest. However, if you do not have a lot of other deductions, this may not be something you can take advantage of. It all depends on what kind of bracket you fall under.
If you do not have the necessary paperwork to verify the interest you paid, you will have to estimate the amount. You can calculate the amount by dividing the total amount of student loan interest you paid over the year by the number of months you had payments.
Being a good taxpayer means being a smart taxpayer. The more you know about the tax laws, the more you can maximize your savings. If you are someone who wants to get back the most that you possibly can, take advantage of the overlooked deductions listed above.
Axiom Tax Resolution Group has a team of trusted tax professionals to help you find permanent tax relief solutions. We will assist you in navigating the most common tax deductions that may save you a significant amount of money. Contact us today to get started!