Top 22 Hidden Tax Deductions You Might Be Missing

Discover 22 commonly overlooked tax deductions to maximize your refunds. From state sales taxes to charitable contributions, learn how to reduce your taxable income and avoid missing out on savings. Stay informed with expert tips and updates on tax laws to optimize your financial planning each year.

Many taxpayers overlook certain deductions that could significantly reduce their tax bills. The IRS acknowledges that many individuals often pay more taxes than necessary, highlighting the importance of claiming all eligible write-offs. Here are 22 commonly missed tax deductions that could save you money.

• State Sales Tax: This deduction is available to all, especially beneficial for residents of states without income taxes. You can choose to deduct either state sales taxes or state income taxes. The IRS provides guidelines on deductible amounts based on local rates.

• Charitable Contributions: Expenses related to volunteering or donating to charities, such as purchase of stamps for fundraising or ingredients for food drives, can be deducted.
• Job Search Expenses: Costs like travel, lodging, employment agency fees, and resume printing are deductible if you itemize.
• Travel for Military Reservists: If military or National Guard members travel over 100 miles away from home overnight for drills or meetings, these expenses are deductible.
• Childcare Credit: You may qualify for a credit of 20-35% of childcare costs incurred during work hours. Some employers also offer reimbursement accounts that might be advantageous.
• Prior Year State Taxes: State taxes owed for the previous year, along with withholding from your paycheck, can be included in your federal return.
• Salaries During Jury Duty: If you receive a salary while serving on jury duty, you can report and deduct this amount on your taxes.
• Education Credits: Even after graduation, you can utilize the Lifetime Learning Credit to offset higher education expenses.
• Bonus Depreciation: Business owners can write off the entire cost of qualifying assets in the year they are placed in service.
• Retirement Penalty Waiver: Seniors aged 62+ owing more than $1,000 can request a penalty waiver using form 2210.
• Legal Fees for Alimony: Part of attorney fees related to establishing alimony or tax advice can be deducted if they exceed 2% of adjusted gross income.

Additional Overlooked Deductions: Many forget to include reinvested dividends, which impact the cost basis of shares. Parents paying student loan interest or self-employed individuals deduct Medicare premiums. Estate taxes paid on IRA assets, mortgage points, and certain credits like the American Opportunity Tax Credit (up to $2,500 annually) are also often missed. Other deductions include airline baggage fees, social security taxes, bond premiums, and hospital fees.

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