There are many things we would like to cross off your “bucket list” before we “kick the bucket,” such as visiting all the continents, jumping out of an airplane, or just trying new things. What most taxpayers don’t know is that they can deduct some costs of the common items on their bucket list or even take them as credits on their income tax returns.
1. Purchase Your Own Boat and Cruise Around the World: Your main home’s mortgage interests and estate taxes can be itemized and deducted on the Schedule A. It is also possible to claim costs linked to a second home, which in this case, includes a boat, so long as it has sleeping, bathroom, and cooking facilities. This means that your mobile home mortgages can also be deducted from your income tax, but under some limitations. Go ahead, own a boat and make it your second home-Uncle Sam will help you out.
2. Volunteer for a Charity in Exotic Locations: Out-of-pocket expenses incurred when offering voluntary services to a qualified tax-exempt charity organization are deductable. Therefore, you can travel to Costa Rica’s rain forests to clear trails and deduct your trip’s costs, so long as the primary objective of the trip is charity work.
3. Learn A Foreign Language: Do you know that you can learn a foreign language for fun and claim up to $2,000 of Lifetime Learning tax credit? The nonrefundable credit amounts to up to 20% of higher education tuition and fees paid by qualified students. Note that this credit starts to phase out once your AGI hits $102,000, or $51,000 for couples and singles respectively.
4. Pop the Question: No, you cannot deduct the costs of your fancy marriage ceremony. However, most married taxpayers who mark the “married filing jointly” box on the IRS Form 1040 realize reasonable savings in taxes.
5. Participate or Win a Marathon: The IRS expects all winnings, be it in a race or gambling, to be reported as “other income,” which is taxable. However, you are free to claim related costs such as entry fees, appropriate gear, and associated expenses, as “miscellaneous itemized deductions” on Schedule A. Keep in mind that these deductions are only but limited to the amount of your winnings.
6. Take a Business Trip Down Route 66 or Pacific Coast Highway: Business trips don’t have to be boring. You can have fun by taking a much more exciting or scenic route and claim basic business travel deductions like airplane tickets, bus, train, or car mileage. Never lose these documents, because the IRS will demand verification.
7. Go Gambling in Vegas: Other than business deductions, you can also deduct loses as a result of gambling up to the amount of your winnings if you itemize. Losses must be properly documented as well as the receipts, tickets, and log of bets. Go roll the dice in Vegas or Atlantic City and claim a deduction from Uncle Sam if things don’t work out in your favor.
8. Enjoy Your Hobby: There are two ways in which your hobby can be tax beneficial. First, you may want to write a book or sell your pieces of art and deduct the costs if you realize any associated income. Note that only deductions up to the limit of the income are allowed; losses cannot be deducted. Alternatively, turn your hobby into a legitimate business and deduct qualified business expenses. All you have to do is run the business professionally, and not as a hobby to qualify.
9. Adopt a New Baby: You can claim dollar for dollar tax credits in child adoption expenses of up to $12,650. These expenses include court charges, fees paid to your attorney, travel costs, amongst others. It is possible to carry the credit to the following year if you cannot use the whole of it in a year. Ensure that you have all necessary records in place, including final decree, certificate of adoption, and even costs incurred in establishing the child’s special needs. This credit starts to phase out the moment your AGI surpasses the $189,710 threshold.
10. Improve Your Home: Any home acquisition debts secured by the home, including a mortgage taken to construct or immensely perk up your primary or second home are deductable. You can also choose to use part of your home for business and deduct the business use expenses of your home.
There are many things you can do for fun and self fulfillment that allows you to claim a deduction or credit from the IRS. You can get your college degree, go golfing, horseback riding or even surfing with business partners, start a scholarship fund, etc. Just ensure that you understand the requirements lest you end up with a huge avoidable bill.