October 08, 2013
In order to minimize your tax bill and maximize your tax refund, you need to make sure to take advantage of every deduction and credit you're entitled to. To make this a little easier for you, we've highlighted 5 deductions that most taxpayers are entitled to take, but often overlook when filing their tax returns.
State Sales Tax. This deduction is especially important for those who live in states that don't have a state income tax, but in certain cases, can also work to the benefit of taxpayers who are required to pay state income tax. Either way, you must choose between deducting state and local income taxes, or state and local sales taxes.
If you made a large purchase such as a car, boat, airplane, RV or home building materials, you get to add the state sales tax you paid to the amount shown in IRS tables for your state. The IRS has a calculator on its web site to help you figure the deduction, which varies by your state and income level. If you use tax preparation software, or an online tax preparation service, they will usually be able to calculate this for you.
Out-of-Pocket Charitable Contributions. You can write off out-of-pocket costs incurred while helping charitable organizations. Some examples are ingredients purchased to prepare a meal for a church or a nonprofit organization's soup kitchen, or the cost of stamps bought for your school's fundraiser. Also, if you drove your car for charitable purposes, you can deduct 14 cents per mile.
FREE Accounting Training from Lorman
Lorman has over 37 years of professional training experience.
Join us for a special report and level up your Accounting knowledge!
Tax Aspects of Operating a Partnership-Taxed Organization
Presented by Langdon T. Owen Jr.
Child Care Credit. It's easy to overlook a portion of the child-care credit if you pay your child-care bills through a reimbursement account at work. Only $5,000 of such expenses can be paid through a tax favored reimbursement account, but up to $6,000 for the care of two or more children can qualify for the credit. So, if you run the maximum through a plan at work, but spend even more for work related childcare, you can claim the credit on an additional $1,000.
State Taxes Paid Last April. If you owed tax when you filed your 2007 state tax return, remember to include that amount with your state tax deduction on your 2008 return, along with state income taxes withheld from your paychecks or paid in quarterly estimated payments.
Property Tax Deduction for Non-Itemizers. Normally, to write off property taxes, you must itemize your deductions. But for 2008, homeowners who claim the standard deduction can also use property taxes to lower their income tax bill. If you don't itemize, you can increase your standard deduction by $500 if you're single, or $1,000 if you're married, to account for property taxes you paid on your home in '08.
These 5 deductions are just a few of many potential ways to increase your tax refund. For more overlooked deductions and other tax saving ideas, visit Income Taxes 101.