Tax Day Countdown: Tax Deductions You Didn’t Know About
The countdown to tax day is on. If you haven’t already filed your taxes, consider yourself lucky. Here are 7 tax deductions you didn’t know about.
1. Generosity?If you loaned money to a friend or family member and they didn?t pay you back, don?t sweat it. Unpaid personal loans are tax deductible. Uncle Sam is looking out for you if you were being a little too generous this year. This also includes unpaid child support. You can read more about it in Publication 535, Business Expenses and Publication 550, Investment Income and Expenses on the IRS website.
2. Home Office?Getting tax relief for your home office is a little bit easier this year. The IRS simplified the option for you this year and they?ll you deduct $5 per square foot of your home office up to 300 square feet.
3. Sales Tax?If your income tax was low this year, you may want to look into how much sales tax you paid. You can claim your sales tax rather than your income tax. If you spent a lot of money, it may be worth going through your receipts and adding it all up. In addition to sales tax, if you didn?t get a state income refund last year, you can deduct it from your taxes this year.
4. Seasoned Students?Even if you finished college 20 years ago, you can still get tax relief for returning to school. You can get up to a $4,000 deduction in your income tax for post-secondary education to improve your skills or add to them.
5. Early Withdrawal Penalties?When you have money tied up in a time deposit account (like a certificate of deposit) and you make early an withdrawal, money that you give up in interest is tax deductible. Refer to page 18 in the IRS Publication 550 for more information.
6. Made in the USA?Uncle Sam wants to keep business in the family. If you make goods here in the United States, you get up to a 9% deduction of your adjusted gross income. However, if your business involves oil, this amount is significantly reduced. You can learn more about this in the instructions for IRS Form 8903.
7. Alimony?If you are contributing income to a former spouse in the form of alimony, this money is tax deductible. This money has to be part of the divorce settlement — and other details of the divorce agreement, like child support, are not tax deductible. More can be found on the IRS website on Tax Topic 452.
Tax time is taxing, but if you do your homework, it doesn?t have to be as damaging to your wallet as you expect it to.