Top Tax Deductions You May Have Overlooked
If you itemize your deductions instead of taking the standard deduction, it’s important that you list everything you qualify for. The limit on taking a deduction you overlooked on a past return is three years. Even within that window, it’s not exactly an easy process. In order to avoid such a hassle, here’s a checklist of some deductions you might forget you qualify for.
Cost of Quitting Smoking: If you enroll in a program to quit smoking, you can probably write off the cost. Note that over-the-counter nicotine patches and gum do not qualify as part of this deduction, however prescription medications do. The other hitch is that your overall medical expenses must be at least 7.5 percent of your total adjusted gross income, or you can’t take this deduction.
Costs of Caring for Business-Related Animals: Do you own a horseback riding school? Are you a magician with a parrot involved in your show? Do you own a dog that protects your business’s property? In each of these cases, because your animal is an important part of your business, the costs of care are deductible.
Job Hunting Costs in Current Role or Job: If you’re looking for employment, you can write off any costs related to securing your new position. For example, if you’re a journalist and you pay dues to an association for networking that connected you to a position at a new newspaper, you can deduct those dues.
Moving Expenses for Your First Job: It’s not always easy to find work in your field when you’re fresh out of college. Sometimes you might have to move across the country to take a job that suits your qualifications. In such a case, any costs related to your relocation are deductible. For example, if you rent a truck to transport your possessions and hire movers to load and unload the truck, whatever you pay is a qualified expense.
Lifetime Learning Credit: If your modified adjusted gross income is less than $65,000 ($131,000 for joint filers) and you are enrolled at a qualified educational institution, you’re in for a treat. You can lower your tax owed by 20 percent of your first $10,000 worth of qualified educational expenses each year. Note that this is a credit, not a deduction, so it doesn’t just lower your taxable income; it directly affects the tax you pay. You can use this credit for as many years as you like.
Fees Paid to Collect Taxable Bond Interest or Stock Dividends: Does your broker require that you pay a fee in order to receive interest payments or dividends from your stock or bond holdings? If so, the fee is tax-deductible.
Reinvested Dividends: This isn’t a deduction, but it’s an easy-to-miss way to (legally and rightfully) lower what you pay in capital gains tax. Capital gains tax is determined by the difference between what you bought a security for and what you sold it for. The price you bought the security for is your “cost basis.” However, if you reinvest dividends over time as the price of the security increases, you’re increasing your cost basis and lowering your taxable capital gains.
Laser Eye Surgery: According to the IRS, the cost of laser eye surgery is a qualified medical expense. Remember, in order for medical expenses to be deductible, they must be at least 7.5 percent of your adjusted gross income.
If none of these deductions apply to you, it’s OK. It’s often fine to take the standard deduction.Go to main navigation