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Types of Overlooked Tax Deductions

Here are some tax deductions that may be overlooked.

Most people aren’t excited about doing their taxes, and even less if they worry they have to pay taxes when they file. The term most often associated with avoiding paying is “tax deduction.” Tax deductions are not just loopholes that the mega-rich use to avoid paying any taxes. Every single taxpayer in the country is eligible for some sort of deduction (most opt for the standard deduction). Some people are better off if they itemize and find each type of deduction they qualify for, however. In those cases, there are several types of deductions that people often miss, which we will explain today. Here are some tax deductions that may be overlooked.

Sales Tax

Most states have sales tax, but you can’t really deduct the sales tax on every tiny item you’ve bought all year long. You can deduct the sales tax paid on big items, however. If you bought a car, a boat, or a house, the tax you paid might be worth deducting, especially if you don’t make a lot of money (you cannot deduct both income tax and sales tax, so choose the one that is higher).

Medical Expenses

If you have paid any medical expenses straight from pocket and were not reimbursed, you may be able to deduct them. Qualified medical expenses, including some vision and dental, can be deducted if they are greater than 7.5% of your adjusted gross income. Depending on how much you made and how much those expenses were, this could be a big deduction.

Charity Deductions

You can deduct donations that you make to charity, including physical items. Most people know to deduct the money that they donate, but you can also deduct the typical used market value for anything you drop off at the Goodwill or have picked up by Purple Heart or similar organizations. 

Educational Loan Interest

For any students paying off student loans, you should know that those payments include interest. The money you pay that goes to the interest (not the principal), can be deducted according to the IRS. You can deduct up to $2500 of interest paid on student loans from your income each year. 

Job-Related Costs

Most people know that they can deduct job-related costs like supplies, uniforms, and even your home office,  but for most individuals, those costs don’t add up enough to outweigh the standard deduction and merit itemizing. If you had to move for a job, however, that could be a different story. Moving costs related to a new job can be a valid deduction, but you need to make sure you include clear receipts. 

Mortgage Refinancing

Finally, if you refinanced your mortgage and paid points, you may be able to deduct a portion of the cost, depending on the life of your loan. 

Contact Bowman & Company Today

Bowman & Company CPA, PC provides all of our individual and small business customers with experienced, accurate, and affordable financial services. Our financial services aim at decreasing your taxes and increasing your net worth through responsible, timely, and accurate recordkeeping. We offer our services to clients throughout the Washington, D.C. metropolitan area including Maryland and Baltimore County, Columbia, and Howard County. For more information on our offerings, contact us online or call us at (410) 381-8121. You can also find us on Twitter,  Linkedin Facebook, and  Youtube.

This entry was posted on Friday, April 30th, 2021 at 12:09 pm. Both comments and pings are currently closed.