5 Commonly Overlooked Tax Deductions
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npocpas1
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npocpas1
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5 Commonly Overlooked Tax Deductions
With tax season approaching, we at Harrington Group want to make sure you have the resources to receive the ultimate tax return! So today, we'll be showing you 5 of the most commonly overlooked tax deductions.
State Sales Taxes This will not apply to the locations we primarily serve, however this is a frequently missed deduction in states that do not impose an income tax. When selecting between deducting state and local income taxes or state and local sales taxes, most California residents will often select the state and local income tax deduction, as it is a better deal for them.
For any Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming residents that may be reading, we recommend claiming the sales tax deduction on your tax return. You can do this in one of two ways. One way is to track all your sales tax paid throughout the year. Or if you purchased any big ticket items such as a home, boat, vehicle, airplane, or did major home renovations, you can add up the sales tax from these items. Keep in mind, every state has a different limit for these particular deductions.
Reinvested Dividends While this doesn’t technically qualify as a deduction, this can be a significant subtraction that could save you a ton in the end. If you are like most investors, you probably automatically reinvest your mutual fund and stock dividends in extra shares. This reinvestment technique is increasing your “tax basis” in the mutual fund or stock. As a result, your capital gain is reduced when selling shares.
Should you, though understandably, forget to include your reinvested dividends in your cost basis, you are probably overpaying your taxes. You find this by subtracting from the proceeds of sale to determine your gain. Consider using Turbo Tax’s s Cost Basis Lookup for assistance.
Out-of-Pocket Charitable Donations While its easy to remember the larger charitable gifts made throughout the year by payroll deduction or check, sometimes the small costs that incurred during a good deed can easily slip through the cracks. For example, if you regularly prepare a meal for a nonprofit or soup kitchen or buy stamps for a school fundraiser, these qualify as a charitable contribution. Additionally, any driving of your vehicle for charity calls for a deduction of 14 cents per mile.
Student Loan Interest (Paid by you OR someone else) Rules around this deduction are changing for the better. Even if someone else has paid back your loan, the IRS is treating it as though they gave you the money and you paid off the debt yourself. In turn, a student, not claimed as a dependent, can qualify for up to $2,500 worth of deductions.
Moving Expenses Rules around this deduction are changing as well, as it now only applies to military personnel. If your relocation is permanent, ordered by the military, and you haven’t received government reimbursement for the move, you qualify. Start counting up those costs spent on lodging, moving, and shipping. Such great news for those who serve!
Keep these tips in mind as we approach tax season!
With tax season approaching, we at Harrington Group want to make sure you have the resources to receive the ultimate tax return! So today, we'll be showing you 5 of the most commonly overlooked tax deductions.
State Sales Taxes This will not apply to the locations we primarily serve, however this is a frequently missed deduction in states that do not impose an income tax. When selecting between deducting state and local income taxes or state and local sales taxes, most California residents will often select the state and local income tax deduction, as it is a better deal for them.
For any Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming residents that may be reading, we recommend claiming the sales tax deduction on your tax return. You can do this in one of two ways. One way is to track all your sales tax paid throughout the year. Or if you purchased any big ticket items such as a home, boat, vehicle, airplane, or did major home renovations, you can add up the sales tax from these items. Keep in mind, every state has a different limit for these particular deductions.
Reinvested Dividends While this doesn’t technically qualify as a deduction, this can be a significant subtraction that could save you a ton in the end. If you are like most investors, you probably automatically reinvest your mutual fund and stock dividends in extra shares. This reinvestment technique is increasing your “tax basis” in the mutual fund or stock. As a result, your capital gain is reduced when selling shares.
Should you, though understandably, forget to include your reinvested dividends in your cost basis, you are probably overpaying your taxes. You find this by subtracting from the proceeds of sale to determine your gain. Consider using Turbo Tax’s s Cost Basis Lookup for assistance.
Out-of-Pocket Charitable Donations While its easy to remember the larger charitable gifts made throughout the year by payroll deduction or check, sometimes the small costs that incurred during a good deed can easily slip through the cracks. For example, if you regularly prepare a meal for a nonprofit or soup kitchen or buy stamps for a school fundraiser, these qualify as a charitable contribution. Additionally, any driving of your vehicle for charity calls for a deduction of 14 cents per mile.
Student Loan Interest (Paid by you OR someone else) Rules around this deduction are changing for the better. Even if someone else has paid back your loan, the IRS is treating it as though they gave you the money and you paid off the debt yourself. In turn, a student, not claimed as a dependent, can qualify for up to $2,500 worth of deductions.
Moving Expenses Rules around this deduction are changing as well, as it now only applies to military personnel. If your relocation is permanent, ordered by the military, and you haven’t received government reimbursement for the move, you qualify. Start counting up those costs spent on lodging, moving, and shipping. Such great news for those who serve!
Keep these tips in mind as we approach tax season!
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