Defining some Tax Deductions

It’s income tax season again, and one of the biggest mistakes that many people make is missing deductions that could be making their refund check a lot bigger, or the amount they’re to pay in a  lot less. Many people just throw on what’s called the standard deduction: for most Americans this tax season, that amount is $5,700. This is the amount of income that you make that isn’t affected by taxation.

Did you know in some cases, you may be missing out on a lot by just taking this instead of itemizing? Last year, it was estimated that there were over one trillion dollars in missed or overlooked deductions. That’s a lot of money! When you itemize, you take each individual deduction, add them all up, and deduct that from your income instead. Here is an inconclusive list of things you may be able to deduct on your taxes:

  • Interest on student loans – your loan company should provide you with the documentation necessary to claim this deduction.
  • Dependent children and dependent parents that you care for. They don’t have to live with you to count, as long as you provide 50% or more of their living expenses and they don’t claim themselves, you can claim them.
  • Energy efficient home renovations and vehicles. Energy efficiency is encouraged, and these deductions prove it.
  • Home office and computer supplies if you have a home office. But you need to be the only one using these things if you claim them.
  • Moving expenses for starting a business or relocating for a new job. Keep those receipts!
  • Health care premiums. Especially for the self-employed or those who own their own business. This is a huge help.
  • Charitable donations, gifts, and supplies/gas for volunteer work. People don’t realize that they can deduct these if it’s to a non-profit organization with the right paperwork.
  • Teacher school supplies- Up to $250
  • Child care- To encourage parents to work, especially because this can be expensive.
  • Lifetime learning credits- If you go back to school as an adult and pay tuition out of pocket, you may be able to qualify for these.

Many times, in order to avoid an audit or to verify the amounts you itemize, you will need sufficient documentation (receipts, inspections to see if what you’re claiming applies for the deduction you’re filing for, etc.) If you think that your deduction is going to be more than $5,700, then it’s wise to itemize. The IRS isn’t allowing itemizers to file until February 14th of this year (because of the Tax Relief act passed at the end of 2010), but the wait may be worth it.

If you need help or think that you may miss something in the process of preparing your tax return, never be afraid to spend the money to go see a tax professional. They’re there to help you get the most for your money. Make sure that you don’t miss out on the money that you deserve this tax season!

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