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What Can I Deduct From My Taxes?
Tax deductions are perhaps the only exciting thing about doing your taxes and despite popular belief, they are not only for the privileged - they're just a bit elusive to the untrained eye. So what can you deduct from your taxes? Let's take a look at ten of the most commonly missed tax deductions.
1. Moving Expenses
Moving doesn't have to be a stressful and expensive or deal, especially considering that the IRS will allow you to deduct a portion of moving expenses from your taxable income at the end of such a life-changing year.
While quite mild, there are restrictions regardless. In order to be able to deduct moving expenses, distance is taken into account. If the cause of moving is to find a new job, your new workplace must be at least 80km (30mi) farther than your previous job. Those of you who are self-employed, don't freak out - the deduction is available to you too!
One more thing: you must be employed full-time for a minimum of 9 months out of the year of the grand move and if you are self-employed, you must stay employed for 78 weeks or 20 out of 24 months.
2. Student Loan Interest
To soften the blow of student loan debt, the IRS allows citizens to deduct student loan interest from their taxable income. Qualifying individuals can deduct awhooping $2,500 from student loan interest annually- that's a huge relief!
There are only a few very reasonable restrictions: Being claimed as a dependent on your parents' tax return is one of them. Another is if you have an above average annual income of over $75,000. The last restriction comes from the type of loan you took out. For example if the loan is a Direct PLUS loan in your parents' name, then you cannot receive a deduction as your parents are obligated to pay that amount.
3. Your Home Office
…but seriously, the deduction only applies if you actually have and use ( most important factor) a home office.
The IRS is especially strict with this deduction because many a clever person before has tried to get free home-remodeling deductions in the name of self-employment. That being said, those who actually do work from home can get everything from repairs and maintenance costs, landscaping, utilities, real estate taxes, and insurance deducted.
4. Animal Expenses
Believe it or not, you can deduct pet expenses from your taxable income. Okay, let me clarify- by "pet", I mean professional service animal.
If you have a medical condition that is aided by the use of a service animal, you can deduct the expenses of that animal if they are higher than 7.5 percent of your taxable income.
In special instances where pets may serve a function to your business, their maintenance expenses may also be written off within a certain amount. A common example are farm animals such as sheep dogs and/or rodent-terminating cats (you'll have to make a reasonable case with that last one).
5. Charitable Causes
It is widely known that if you donate your money to a tax-exempt organization, that money is deductible from your taxable income. What you didn't know is that you can deduct expenses related to those charitable acts you often overlook such as that Cupcake Fun draiser for your kids' school or the gas, scholastic materials, entertainment, and even lunch expenses for that kid you tutor every Wednesday night.
6. A Hobby Turned Small Business
A good amount of tax deductions have been overlooked because of that faint line that distinguishes a hobby from a business venture.
For example: You buy expensive brushes, paint, and canvas to pursue your artistic talents and many times, you end up selling them to people who really like your work. The reason it is an amazing idea to stop calling your painting ventures a hobby and start calling your portrait sales a small business is because the latter will get all those expensive oil paints deducted from your taxable income.
Do anything for fun that makes you money? Chances are, it's not a hobby - it's a business!
7. Medical Expenses
Turns out, you don't have to to pay an arm and leg for medical expenses. The IRS allows you to deduct a good chunk of them through itemized deductions if they reach a certain percentage of your total taxable income.
The medical deduction policy is also quite generous, allowing you to write off practically any therapy, procedure, or treatment considered necessary for the improvement or maintenance of your health.
8. Commute Expenses
While the IRS won't deduct the daily expense of commuting to work, it will allow you to deduct a hole bunch of work-related travel expenses as well as any transportation (public, alternative, etc.) under Transit Chek.
Transit Chek is a commuter program employers can participate in for the benefit of employee commuter deductions. This works by voluntary enrollment in the Transit Check program, which will then with hold a percentage of your paycheck.
While initially it might look like just another decrease in your monthly cash availability, come tax season, you'll find that a monthly deduction of up to $250 is absolutely worth it.
9. Sales Tax
Sales tax are subtle, sneaky little expenses that can add up to ridiculous heights when you buy that new family-friendly car or the expensive kitchen appliances.
While you can't deduct sales tax from everything, big purchases that will benefit your work life or your children's' education can definitely be deducted up to a certain percentage.
10. Tax Preparation Expenses
An often overlooked perk of preparing your taxes is that you can deduct the cost from them!
The tax preparation deduction is not only convenient in itself, but it is also good incentive to employ an accountant for your tax preparation purposes. Having a professional prepare your taxes can multiply your deductions because they know where to look for them.