10 most overlooked tax deductions
October 2, 2009 · Tagged with Taxes
Through deductions, American wage earners have the chance to pocket more income, rather than hand over their hard-earned cash to the government. For those who keep good records, deductions can mean more money – and less for the IRS. You probably know the most common deductions, such as deductions for property taxes and charitable donations, but there are related deductions you might be overlooking. Read on for some of the common fees and expenses you can deduct to reduce your tax bill.
The Deductions Caveat
Some of the deductions listed here fall under the label of miscellaneous deductions, and they are below the line – that is, you take the deductions after you’ve calculated your adjusted gross income (AGI). To cash in, you must itemize deductions on Schedule A of your federal return rather than take the standard deduction. The sum of all of your miscellaneous deductions must be more than 2% of your AGI; therefore, if your AGI is $50,000, all of your miscellaneous deductions must top $1,000. The kicker, of course, is that you can deduct only the amount that exceeds 2% (that is, the amount above and beyond $1,000).
Selling Your Home, Sweet Home
Owning a home can give you hefty tax write-offs each year, from deductions on points paid when you bought the home to deductions on mortgage interest and property taxes while you lived in it. When you sell your home, though, you also get some tax benefits: you can deduct the fees you incur to unload your home. You can still deduct a portion of the property taxes you paid while you lived in the home, and you get to deduct the commission you paid to your real estate agent and any fees you paid at closing.
Driving Home a Tax Break
You pay a sales tax on a new car when you buy it and then some states continue to tax you each year for, as the state of Kentucky puts it, “the privilege of using a motor vehicle upon the public highways.” States with vehicle taxes as of 2009 include Colorado, Kansas, Kentucky, Nebraska, Nevada, New Hampshire, South Carolina, Texas and Virginia.
Most states send out a notice to demand their tax payment to register your car each year. After you slap your new decal on your car, file away the receipt and add that payment to your deductions for personal property taxes in April.