Money 101: Tax Deductions You May Have Missed
The U.S. tax code has over seven million words in it. Seriously — seven freaking million! Amongst all those pages and phrases are a variety of tax deductions that you can use to reduce the bite that Uncle Sam is taking out of your hard-earned wages. The good news: there are loads. So, if you’re in the dark, consider these suggestions from Manisha Thakor, personal finance expert for women and author of On My Own Two Feet: A Modern Girl’s Guide to Personal Finance.
Buying A New Home
If you sold your existing home and bought a new one by the end of April, you will get a $6,500 tax credit. There are, however, some key rules to getting this credit: 1) Your adjusted gross income must be less than $245,000 for a married couple filing jointly; 2) You have to have lived in your previous home for at least five out of the last eight years; 3) You can’t pay more than $800,000 for the new house; 4) You can’t buy the new house from a family member. This credit began on November 7, 2009. So, if you bought a new home since then (or if you are in contract right now and will close by the end of June) and meet the above criteria, bingo — you qualify.
The silver lining to financing your dud of an ex’s post-divorce lifestyle: if you have to pay him (or her) alimony, you can deduct that. Sadly, for the thousands of dollars in therapy said failed relationship will cost you … you’re out of luck there.
To be deductible, any goodwill donations you’ve made must go to a qualified non-profit, and for any gift over $250 you’ll need to show official documentation from the organization thanking you. So rack your brain to remember all you’ve done over the course of the year – this includes stamps for mailing flyers, ingredients for making a casserole for a bake-off and gas for the miles you drove to get to a volunteer event.
No need to groan the next time you have to fork over some of your own cash at the CVS to buy glue sticks! If you are a teacher, aide or principal in K-12th grade, you can deduct up to $250 for out-of-pocket supplies you purchase for the classroom.
Moving Expenses To Take A Job
If you moved more than 50 miles to take a job, you can deduct the cost of getting yourself and your household goods to the new area — including 24 cents per mile for driving your own vehicle –plus parking fees and tolls. Unfortunately, you can’t deduct job hunting expenses or the Jimmy Choos you wore to the interview that sealed the deal.
State Sales Tax
Paying state sales tax really adds up. But believe it or not, you can actually get some of those extra charges back by deducting them from your taxes. The IRS has standard tables showing what residents of each state can deduct. And, if you bought something big like a car or boat and have the paperwork to prove it, you can deduct even more.
Mortgage interest is a tax-deductible expense, but in order to apply it as a deduction you must itemize — it’s not automatic. Two-thirds of tax payers tax the “standard deduction” — $5,700 if single; $11,400 if married filing jointly — which means you don’t get these itemized goodies.
If you are self-employed and were unable to participate in any group health plans, you can deduct the full cost of health insurance you purchase for yourself, your spouse, and/or your dependents. Fingers crossed that one day Botox treatment costs can be deducted as well.
The Money section and all articles within it are sponsored by Free Credit Report; however, the articles are all independently produced by The Frisky and the opinions and views expressed by the writers and experts are their own.