When filing taxes, 99.9% of taxpayers closely pay attention to deductions lest they let an opportunity to ease their tax burden slip through their fingers. However, compared to tax credits, deductions are less attractive, since tax credits actually cut your tax liability. Deductions and credits or any other tax breaks available will go a long way in trimming your tax bill, but there are several tax breaks that are overlooked by most taxpayers when filing. Discussed below are the top four tax such credits and deductions:
1. Job Search Deductions: Job searching is a job in its own right and incurs expenses that range from transport to interview sites, résumé consultations, preparing your résumé and even mailing it to potential employers, long distance telephone calls, amongst other. The IRS accepts deductions of job search costs on Schedule A as miscellaneous expenses. Go ahead and search for that job claim a deduction, so long as it is in the same line of work as your former job.
2. Work-Related Relocation: Assuming that you have secured a job and have to relocate, go ahead and pack your up your things and move. Moving expenses are deductable and the beauty of it is that you actually don’t have to itemize to deduct. Just be sure that the move passes the IRS test before you deduct.
3. Charitable Donations: As some hunt for jobs, there are some taxpayers who had an amazing financial year, and earned more than enough or they just feel philanthropic and ready, to share the little or much they have earned with the less fortunate. Charitable donations, be it cash, a car, some items, etc., are deductable.
4. Aging Parents and Medical Expenses: Baby boomers have a lot of responsibilities, especially in ensuring that their aging parents are taken good care of. Sometimes, your parents can be claimed as a dependent resulting in some additional exemptions during filing. Your folks don’t necessarily have to qualify as your tax dependents, but if you spend money on medicine and healthcare, then you can write these expenses off your own Schedule A.
You might be losing lots of tax savings if you keep claiming the same tax breaks every year without researching on other tax breaks you might be eligible for. Just ensure that you are not missing out on valuable tax deductions and credits that could help you save an extra dollar. However, to avoid any IRS problems, understand the requirements of all deductions and credits before claiming them on your return.