As taxpayers, many of us tend to focus on filing our taxes accurately and on time, but often overlook several deductions that could potentially reduce our tax liability. Here are some commonly missed deductions:
1. State Sales Tax: If you itemize deductions, you can claim the state sales tax you paid throughout the year on items like cars, boats, and home improvements. This is especially beneficial if you live in a state that doesn’t have an income tax.
2. Charitable Contributions: Donations to charitable organizations like Goodwill, the Salvation Army or a place of worship can be deducted if you keep the receipts. Monetary donations are also deductible, but you’ll need to provide proof of the donation through a bank statement or canceled check.
3. Job-Search Expenses: While looking for a new job, you may have incurred expenses such as fees for a recruiter’s service, travel costs for interviews, and printing and mailing your resume. Such costs are deductible if they total more than 2% of your adjusted gross income.
4. Medical Expenses: Medical expenses like doctor visits, lab fees, and prescription costs can add up quickly. If your total medical expenses for the year exceed 7.5% of your adjusted gross income, you can claim the excess.
5. Educator Expenses: If you’re a teacher, you can deduct up to $250 for expenses related to classroom supplies, books, and educational materials. This deduction is especially helpful for teachers who spend money out of pocket without reimbursement.
6. Retirement Contributions: Contributions to a traditional IRA or 401(k) can reduce your taxable income, lowering your overall tax liability. The maximum contribution limit for 2020 is $19,500, and those over age 50 can contribute an additional $6,500.
7. Home Office Deduction: If you work from home, you may be able to deduct the portion of your home that serves as your office. This applies to both homeowners and renters, but you must use the area solely for work to qualify.
Don’t miss out on these deductions! Keep proper records and receipts and speak with a tax professional for guidance. By taking advantage of these often-overlooked tax deductions, you can potentially save money and lower your tax liability.