As tax season approaches, many people are looking for ways to save money and maximize their deductions. However, many taxpayers may not be aware of some of the lesser-known tax write-offs that can save them money. It can take a professional tax preparer to make you aware of some of these, but in lieu of that, here are some of the most overlooked tax deductions that can help you lower your tax bill:
Job Search Expenses
If you’re looking for a new job, you may be able to deduct certain expenses related to your job search. This includes the cost of résumés, travel expenses to and from job interviews, and other job-hunting expenses. However, in order to qualify for this deduction, you must be looking for a new job in the same field as your current or previous job, and the expenses must be incurred in the tax year.
Business Use of Your Home
If you use a portion of your home for business purposes, you may be able to claim a deduction for the expenses related to that space. This includes the cost of utilities, insurance, and repairs. However, in order to qualify for this deduction, the space must be used exclusively for business and must be the principal place of business.
Charitable contributions are one of the most well-known tax deductions, but many people still overlook them. Donations made to qualified charitable organizations can be written off on your taxes. This includes donations of money, as well as donations of property or goods. However, in order to qualify for this deduction, you must keep proper documentation of your donations, such as a receipt or a cancelled check.
State Sales Tax
If you live in a state with a sales tax, you may be able to deduct the amount you paid in state sales tax on your federal taxes. This is especially beneficial for those who live in states with no income tax. However, in order to qualify for this deduction, you must choose between deducting state income taxes or state sales taxes.
Investment Fees and Expenses
Investment fees and expenses, such as the cost of tax preparation software, can also be written off on your taxes. This includes fees paid to financial advisors and the cost of investment publications. However, in order to qualify for this deduction, the fees and expenses must be related to income-producing investments.
Many people are not aware that certain educational expenses can also be written off on their taxes. This includes tuition and fees for courses that maintain or improve your job skills. However, in order to qualify for this deduction, the education must be related to your current job or job you are looking for, and you can’t be a full time student.
Medical and Dental Expenses
Medical and dental expenses can also be written off on your taxes. This includes the cost of prescriptions, doctor visits, and other out-of-pocket expenses. However, in order to qualify for this deduction, the expenses must exceed 7.5% of your adjusted gross income.
If you move for a new job, you may be able to deduct certain expenses related to your move. This includes the cost of transportation and storage of your household goods, as well as the cost of travel to your new home. However, in order to qualify for this deduction, you must have moved at least 50 miles for the new job, and the move must be within one year of starting the new job.
Retirement Savings Contributions
Many people are aware of the tax benefits of contributing to traditional retirement savings plans such as a 401(k) or IRA, but there are other options available that also offer tax benefits. These include contributions to a Simplified Employee Pension (SEP), a SARSEP, Simple IRA and a Roth IRA. However, it’s important to note that there are contribution limits and income restrictions for these plans, so it’s best to consult with a financial advisor or tax professional to ensure you are maximizing your retirement savings while remaining within the guidelines set by the IRS.
Home Office Expenses
If you work from home, you may be able to deduct certain expenses related to your home office. This includes the cost of utilities, insurance, and repairs for the portion of your home used for business purposes. However, in order to qualify for this deduction, the space must be used exclusively for business and must be the principal place of business.
Alternative Energy Tax Credits
Alternative energy tax credits are incentives provided by governments to encourage the use of renewable energy sources. Solar energy is one of the most popular forms of renewable energy, and as a result, many countries offer tax credits to encourage the installation of solar panels.
Solar tax credits are designed to offset the cost of installing solar panels on a home or business. In the United States, for example, homeowners who install a solar energy system can receive a federal tax credit of up to 26% of the total cost of the installation. This credit can be used to offset the homeowner’s federal tax liability and can even be carried forward to future tax years if the full credit cannot be used in the current year.
In addition to federal tax credits, many states also offer their own tax incentives for solar energy installations. These incentives can take the form of rebates, property tax exemptions, or other financial incentives.
The goal of these tax credits is to make solar energy more affordable and accessible to the general public, as well as to reduce the country’s reliance on fossil fuels. By incentivizing the use of renewable energy, governments hope to reduce greenhouse gas emissions and promote sustainable energy practices.
Overall, solar tax credits can be a significant financial incentive for homeowners and businesses looking to invest in solar energy. By taking advantage of these credits, individuals can not only save money on their taxes but also make a positive impact on the environment by reducing their carbon footprint.
In conclusion, there are many little-known tax write-offs that can help you save money on your taxes. These include:
- Job search expenses,
- Business use of your home,
- Charitable contributions,
- State sales tax,
- Investment fees and expenses,
- Educational expenses,
- Medical and dental expenses,
- Moving expenses,
- Retirement savings contributions, and
- Home office expenses.
However, it’s important to note that in order to qualify for these deductions, you must meet certain requirements and have proper documentation. It’s always best to consult with a tax professional or use tax preparation software to ensure that you are taking advantage of all the deductions and credits that you are eligible for.