We spend a lot of time these days searching for coupon and promo codes when we shop. (Guilty!) Saving money is great for our budgets, so, what about tax ‘coupons’? I’m talking about deductions. Every year, trillions of dollars of tax deductions are ready and waiting for our claiming, but, every year, many are left on the table. Remember, a tax deduction reduces the amount of income that gets taxed—your AGI, adjusted gross income. If you reduce what you’ve earned, you reduce your tax bill! So, don’t leave a dollar behind.
Here are the most commonly overlooked tax deductions:
Sales taxes: Some states have very low or even no income taxes. If you’re lucky enough to live in one, make sure to add up all the state and local sales tax you paid in 2011, (especially if you bought a big item like a car or made major purchases for a home renovation), because it’s a tax deduction. If you already pay state income taxes, they are most likely much higher than your total sales tax, and, you can’t claim both. Also, don’t forget to deduct the state and local income and property taxes you paid in 2011 as well.
Healthcare insurance premiums: Especially if you’re self-employed, paying your own health insurance can be a four-figure bill every month. Add up all the premiums you paid for the year as well as any other medical expenses to claim your healthcare costs deduction. If you’re self-employed, the need to have this total exceed 7.5 percent of your AGI does not apply. However, even if you’re a full-timer, you may be paying hundreds every month in premiums. Add these up, plus your other medical expenses and should they add up to more than 7.5% of your AGI, you can take the deduction as well.
If you were looking for a job in the same line of work this past year, make sure to add up your job-hunting expenses, such as travel, resume prep, or placement agency fees. Job-relocation costs count here as well. If these expenses exceed 2 percent of your AGI, claim your deduction.
Donations: Charitable donations of cash are definitely deductions but don’t forget other non-cash items you’ve given as well. If you donated clothes, toys, household goods and food, make sure you have a receipt from the organization so you can claim a deduction.
College costs are so high, might as well soften the bite with up to $4,000 in tax deductions you can claim for college or professional school tuition, fees and more. There are income limits, however--$80,000 AGI for a single tax filer and $160,000 for joint filers.
Have a tax tip to share or a question? Tweet @carmenwongulric, #OnFile.