28 Jan 10 US Federal Tax Deductions You May Not Know About
There is a common saying, “The only two things you can’t avoid are death and taxes.” You may not be able to completely avoid paying taxes, but you shouldn’t have to pay more than required. However, the tax code in the US is large and complicated. You may qualify for tax deductions that you didn’t know about. Here are 10 tax deductions that can save you money on your US Federal tax bill.
- State Sales Tax. 45 of 50 US States have a sales tax. (Alaska lets its municipalities levy sales taxes, which averages 1.69%) You can write off that percentage of your income that you paid to the state for sales taxes. On years where you had major purchases, such as buying a car or doing home improvements, this could be quite a money saving deduction.
- A “per-diem” for business travel days. If you are a frugal person who doesn’t spend a lot on food and drink while traveling, or you are just really bad at keeping receipts, you can deduct a flat amount per day for travel days, instead of using exact amounts. How much the government will let you deduct varies, depending upon the cost of living in the place to where you traveled. For example, you get to deduct more to expensive cities, such as New York or San Francisco than some small Midwestern town. Check with your accountant or the IRS website for the amount allowed per city.
- State Income Tax. What you paid to your state last year is deductible from your Federal Income Tax that you will pay this year.
- Tax Preparation Fees. A good tax accountant can help you save lots of money on your taxes. Their fees are also tax deductible. If you use software or services from TurboTax, those costs are also deductible.
- Out-of-Pocket Charitable Deductions. Keep track of money that you give to charity during the year, but also keep track of your expenses you incur while doing activities for a charity. For example, if you bought ingredients for a charity bake sale, those are deductible. Also, driving to and from charity events gives you a 14 cent per mile deduction.
- Car Mileage for Work-related Trips. Even if you have a car that you use for both business and personal use, you can deduct work-related mileage. The key to this deduction is record keeping. Keep a small notebook in your car’s glovebox. When you drive for business purposes, note the date, purpose and the beginning and ending odometer readings, for your proof for the IRS.
- Solar Energy Tax Credit. If you put solar panels on your house you can deduct a large percentage of their cost from your federal tax bill. The amount is dependent upon factors such as how much your tax bill is this year and if the house is your primary residence or a rental property. See the IRS website for the details.
- Job Hunting Cost. The government understands that you have to spend money to make money. A variety of job hunting-related expenses are deductible, such as mileage driving to and from interviews, printing costs for resumes and business cards and food and lodging expenses if you have to go out of town.
- Child-Care Credit. Depending upon your income, you could get a tax credit for 20-35% of the amount you pay for childcare, for your dependent children.
- Health Insurance. Even if you are paying a portion of the cost of your health insurance on an employer sponsored health plan, you can deduct premium amounts that exceed 10% of your income. If you are self-employed, you can deduct them all.
There are thousands of other deductions that you could qualify for, besides these 10. The best way to find them is use a qualified tax accountant or use tax software, such as TurboTax. If you do your own taxes, visit the IRS website and read up on the new laws and visit reputable financial websites for advice. Educating yourself on what is available, will be well worth your time.