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Don't Overpay Your Taxes
Years ago, the head of the IRS told Kiplinger's Personal Finance magazine that he figured millions of taxpayers overpaid their taxes every year by overlooking just one of the money-savers we're about to share. Claim them if you deserve them ... and cut your tax bill to the bone.
Here's a baker's dozen of the most overlooked tax deductions.
· Read Full Article
Next: Overlooked Deduction No. 1More on Taxes:
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1. State Sales Tax
Although all taxpayers have a shot at this write-off, it makes sense primarily for those who live in states that do not impose an income tax. You must choose between deducting state income taxes or state sales taxes. For most citizens of income-tax states, the income-tax deduction is a better deal.
Next: Overlooked Deduction No. 2More on Taxes:
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2. $250 Educators' Expenses
Teachers and their aides can deduct up to $250 they spent in 2007 for books and classroom supplies. If you qualify, put your deduction on line 23 of the Form 1040. You get this deduction regardless of whether you itemize.
Next: Overlooked Deduction No. 3More on Taxes:
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3. College Tuition
You may qualify to deduct up to $4,000 you paid in college tuition in 2007 for yourself, your spouse or a dependent. This break can pay off if your income is too high to qualify to claim the Hope or Lifetime Learning credit. You also get to claim this deduction regardless of whether you itemize.
Next: Overlooked Deduction No. 4More on Taxes:
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4. Student Loan Interest ... Paid by Mom or Dad
Until recently, if parents paid back a student loan incurred by their children, no one got a tax break. To get a deduction, the law held that you had to be both liable for the debt and actually pay it yourself. But now there's an exception. If Mom and Dad pay back the loan, IRS treats it as though they gave the money to their child, who then paid the debt. So, a child who's not claimed as a dependent can qualify to deduct up to $2,500 of the loan interest.
· More Deductible Education Expenses
Next: Overlooked Deduction No. 5More on Taxes:
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5. Out-of-Pocket Charitable Contributions
It's hard to overlook the big charitable gifts you made during the year, by check or payroll deduction. But little things add up, too, and you can write off out-of-pocket costs you incur while doing good works. Ingredients for casseroles you regularly prepare for a nonprofit organization's soup kitchen, for example, or the cost of stamps you buy for your school's fundraiser count as a charitable contribution.
· More Charitable Deductions
Next: Overlooked Deduction No. 6More on Taxes:
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6. Moving Expenses to Take First Job
Here's an interesting dichotomy: Job-hunting expenses incurred while looking for your first job are not deductible; but moving expenses to get to that first job are. And you get this write-off even if you don't itemize. If you moved more than 50 miles, you can deduct the cost of getting yourself and your household goods to the new area, including 20 cents a mile (and parking fees and tolls) for driving your own car.
Next: Overlooked Deduction No. 7More on Taxes:
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7. Military Reservists' Travel Expenses
If you are a member of the National Guard or military reserve, you may deserve a deduction for travel expenses to drills or meetings. To qualify, you must travel more than 100 miles and be away from home overnight. If you qualify, you can deduct the cost of lodging and half the cost of your meals, plus 48.5 cents a mile (and any parking or toll fees) for driving your own car. You get this deduction regardless of whether you itemize.
Next: Overlooked Deduction No. 8More on Taxes:
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8. Child-Care Credit
It's easy to overlook the child-care credit if you pay your child-care bills through a reimbursement account at work. The child-care credit applies to no more than $6,000 (for two or more children) of qualifying expenses. And, the law allows you to run up to $5K of such expenses through a tax-favored reimbursement account at work. So, if you run the maximum $5K through a plan at work, but spend more for work-related child care, you can claim the credit on that extra $1K. That would cut your tax bill by at least $200.
· More: Deductions for Dependents
Next: Overlooked Deduction No. 9More on Taxes:
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9. Estate Tax on Income in Respect of a Decedent
This sounds complicated, but it can save you a lot of money if you inherited an IRA from someone whose estate was big enough to be subject to the federal estate tax. Basically, you get an income-tax deduction for the amount of estate tax paid on the IRA balance. As you withdraw the money from the IRA and pay tax on it, you also get to deduct a proportional amount of the estate tax paid. If you withdraw $50,000 in one year, for example, you get to claim a $22,500 itemized deduction on Schedule A.
Next: Overlooked Deduction No. 10More on Taxes:
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10. State Tax You Paid Last Spring
Did you owe tax when you filed your 2006 state tax return in the spring of 2007? Then remember to include that amount with your state-tax deduction on your 2007 return, along with state income taxes withheld from your paychecks or paid via quarterly estimated payments.
Next: Overlooked Deduction No. 11More on Taxes:
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11. Refinancing Points
When you buy a house, you get to deduct points paid to get your mortgage in one fell swoop. When you refinance a mortgage, though, you have to deduct the points over the life of the loan. That means 1/30th a year if it's a 30 year mortgage -- that's $33 a year for each $1,000 of points you paid. Not much, maybe, but don't throw it away.
· More Deductions for Homeowners
Next: Overlooked Deduction No. 12More on Taxes:
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12. Reinvested Dividends
This isn't really a deduction, but it is a subtraction that can save you money ... and this is a break that many miss.
If, like most investors, you have mutual fund dividends automatically invested in extra shares, remember that each reinvestment increases your "tax basis" in the fund. That, in turn, reduces the taxable capital gain (or increases the tax-saving loss) when you redeem shares. Forgetting to include the reinvested dividends in your basis means overpaying your tax.
Next: Overlooked Deduction No. 13More on Taxes:
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13. Jury Pay Paid to Employer
Some employers continue to pay employees' full salary while they are doing their civic duty but ask that they turn over their jury fees to the corporate treasury. The only problem is that the IRS demands that you report those fees as taxable income. You've always had a right to deduct the amount, so you weren't taxed on money that simply passed through your hands. But now tax forms include a line dedicated to this deduction.
· More Deductible Employee Expenses
Next: More Hot FeaturesMore on Taxes:
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Kiplinger on Taxes
Recent Comments
Ejarrettl 07:41:49 PM Jun 30 2008
HOW IS ALL THESE MEXICAN COMING HERE PAYING NO FED TAX AND GETTING TAX CHECKS
FreightBusters 08:06:28 PM May 16 2008
tHAT 600 BUCKS WILL KEEP YOU QUIET TILL JAN....GET IT????? DO YOU GET IT>>????
FreightBusters 08:05:36 PM May 16 2008
aND YOU THINK THIS MILITARY IS KEEPIONG YOU SAFE BY THE WRONG WAR THEY ARE FIGHTING.....YOU ARE IN FOR A BIG SURPRIZE.......YOU ARE LESS SAFE THEN YOU WERE 7 YRS AGO!!! tHIS bUSH IS AN OIL ADDICT AMONG OTHER THINGS! i WAS TOLD 7 YRS AGO AFTER HE FAILED SERVERAL COMPANYS HE SHOULD BE SWEEPING THE STREETS.....
FreightBusters 08:03:07 PM May 16 2008
Look at the taxs back in the 40s they were 90 % of your paychecks..how in the hell do you think they paid for the roads!!!.....AND TAXS ARE TO HIGH
THIS GOVERNMENT IS BSIN YOU!!!!! WE CANT EVEN AFFORD TO TAKE CARE OF OUR BRIDGES..OUR ROADS.....YOU ARE A PAWN IN THIS gop GAME...YES CARRY YOUR GUNS THAT KEEPS YOU HAPPY.....
FreightBusters 08:01:03 PM May 16 2008
Univeral health care in england was put in place for all their people in 1947
we have been bo shited here!!! you are what you want to believe!!!!!!
Better stand up and change this country
FreightBusters 07:59:38 PM May 16 2008
Snookedd get the facts....you dont know what the hell you are talking about!!! change this system!!!!
FreightBusters 07:58:35 PM May 16 2008
Dont compare Canadian taxs...they pay 7.5% everytime they buy somthing..so do you spend 20,0000 to 30,000 a year for walmart dinneres etc and pay $ maybe $2000 a year for full medical coverage.....thats under 200 months a month for medical......and you think their taxs are high.....if you have done an income tax form in Canada you get plenty of deductions..beginning with 9,500 for you and 9,500 for your spose not to include 30 other deductions...this government is bow **** in you..and you believe it!!! if you believe you have it good here you are in deep trouble!!!! stand up and get the facts!! and change this sorry system we have you are getting screwed!!!!!!!!!!!!!!!!!!!!!!!
Snooked123 05:53:24 PM May 16 2008
Yes, Canada has free health care. You want to pay the taxes they have to pay to fund free heath care?
LatinoLN 12:08:44 PM Apr 18 2008
stop the war. What about universal heath care benefits like Europe and Canada.
I guess i will have to give more donations and find a way to pay less taxes for the war that only benefit some people and not us as a country. I used to travel often,but our money is not worth it anymore that sucks.
LARUEPJ 10:22:34 AM Apr 17 2008
The only way to balance this tax issue is the more one earns, the more one should pay. Instead, it comes across (in most cases) as the more one earns, the greedier one gets.
I can count on one hand the (publicly known) number of people who donate to charities, foundations, etc., on a regular basis. I don't have enough fingers and toes to count the ones who don't contribute to anything or anyone but themselves and their greedy children and/or grandchildren.
I admire those who give "in secret," but they are usually the ones who don't flaunt their wealth. They embrace it and use it the way it should be used...for the betterment of mankind.
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- Itemizing Deductions
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