Filing the tax deductions reduces your taxable income and can make the difference between owing quite a bit to the Internal Revenue Service or a lot less. In a rush to make the April 15 deadline, many people spend little time researching their taxes and miss out on deductions. While the IRS will penalize you for paying too little taxes, the penalty is also on you for paying too much. Save money the next time you prepare taxes by declaring often-overlooked write-offs.
State and Local Taxes
The IRS allows you to deduct state and local taxes from your gross income. This is a major savings for those who live in high-tax areas such as New York City. You may deduct property taxes, too.
You may also have the option of deducting sales tax expense in lieu of income tax. This includes sales tax on vehicles, boats and home materials. Keep records so you an prove these expenses in the event of an audit.
Interest on student loans and mortgages is tax-deductible. The former has a limit of up $2,500, while the latter has no limit. Penalties for early or late repayment qualify as well.
According to Kiplinger, even interest someone else pays for you may qualify. For instance, parents sometimes pay student loan interest for a nondependent child. Because the loan is in the student's name, the IRS views the money as a gift and sees the interest as an expense the child pays. Thus, recent graduates who are lucky enough to have their parents help them repay loans may write off all interest payments.
Job Expenses and Home Offices
Job-related expenses your employer does not reimburse you for are tax-deductible. Examples include using your automobile for work errands, dues to professional organizations and unions, tools and work uniforms. You may also write off moving expenses for a first job, so long as it is more than 50 or more miles away from your old home.
If you dedicate a room in your house exclusively for business use, you may deduct relevant expenses. Even if you are an employee you may still qualify, so long as the office use is at the convenience of your employer. Typical expenses you can write off are partial rent or mortgage payments, office computers and utilities for that room.
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