Taxes - What Can I Deduct?
What Can I Deduct From My Taxes?
Taxdeductions are perhaps the only exciting thing about doing your taxes anddespite popular belief, they are not only for the privileged- they're just abit elusive to the untrained eye.
Sowhat can you deduct from your taxes? Let's take a look at ten of themost commonly missed tax deductions.
1. Moving Expenses
Movingdoesn't have to be a stressful and expensive ordeal, especially consideringthat the IRS will allow you to deduct a portion of moving expenses from yourtaxable income at the end of such a life-changing year.
Whilequite mild, there are restrictions regardless. In order to be able to deductmoving expenses, distance is taken into account. If the cause of moving is tofind a new job, your new workplace must be at least 80km (30mi) farther thanyour previous job. Those of you who are self-employed, don't freak out- thededuction is available to you too!
Onemore thing: you must be employed full-time for a minimum of 9 months out of theyear of the grand move and if you are self-employed, you must stay employed for78 weeks or 20 out of 24 months.
2. Student Loan Interest
Tosoften the blow of student loan debt, the IRS allows citizens to deduct studentloan interest from their taxable income. Qualifying individuals can deduct awhooping $2,500 from student loan interest annually- that's a huge relief!
Thereare only a few very reasonable restrictions: Being claimed as a dependent onyour parents' tax return is one of them. Another is if you have an aboveaverage 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 yourparents' name, then you cannot receive a deduction as your parents are obligatedto 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.
TheIRS is especially strict with this deduction because many a clever personbefore has tried to get free home-remodeling deductions in the name ofself-employment. That being said, those who actually do work from home can geteverything from repairs and maintenance costs, landscaping, utilities, realestate taxes, and insurance deducted.
4. Animal Expenses
Believeit or not, you can deduct pet expenses from your taxable income. Okay, let meclarify- by "pet", I mean professional service animal.
Ifyou have a medical condition that is aided by the use of a service animal, youcan deduct the expenses of that animal if they are higher than 7.5 percent ofyour taxable income.
Inspecial instances where pets may serve a function to your business, their maintenanceexpenses may also be written off within a certain amount. A common example arefarm animals such as sheep dogs and/or rodent-terminating cats (you'll have tomake a reasonable case with that last one).
5. Charitable Causes
Itis 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 thatyou can deduct expenses related to those charitable acts you often overlooksuch as that Cupcake Fundraiser for your kids' school or the gas, scholasticmaterials, entertainment, and even lunch expenses for that kid you tutor everyWednesday night.
6. A Hobby Turned Small Business
Agood amount of tax deductions have been overlooked because of that faint linethat distinguishes a hobby from a business venture.
Forexample: You buy expensive brushes, paint, and canvas to pursue your artistictalents and many times, you end up selling them to people who really like yourwork. The reason it is an amazing idea to stop calling your painting ventures ahobby and start calling your portrait sales a small business is because thelatter will get all those expensive oil paints deducted from your taxableincome.
Doanything for fun that makes you money? Chances are, it's not a hobby- it's abusiness!
7. Medical Expenses
Turnsout, you don't have to to pay an arm and leg for medical expenses. TheIRS allows you to deduct a good chunk of them through itemized deductions ifthey reach a certain percentage of your total taxable income.
Themedical deduction policy is also quite generous, allowing you to write offpractically any therapy, procedure, or treatment considered necessary for theimprovement or maintenance of your health.
8. Commute Expenses
Whilethe IRS won't deduct the daily expense of commuting to work, it will allow youto deduct a hole bunch of work-related travel expenses as well as anytransportation (public, alternative, etc.) under TransitChek.
TransitChekis a commuter program employers can participate in for the benefit of employeecommuter deductions. This works by voluntary enrollment in the TransitCheckprogram, which will then withhold a percentage of your paycheck.
Whileinitially it might look like just another decrease in your monthly cashavailability, come tax season, you'll find that a monthly deduction of up to$250 is absolutely worth it.
9. Sales Tax
Salestax are subtle, sneaky little expenses that can add up to ridiculous heightswhen you buy that new family-friendly car or the expensive kitchen appliances.
While you can't deduct sales tax from everything, big purchases that willbenefit your work life or your children's' education can definitely be deductedup to a certain percentage.
10. Tax Preparation Expenses
Anoften overlooked perk of preparing your taxes is that you can deduct the costfrom them!
Thetax preparation deduction is not only convenient in itself, but it is also goodincentive to employ an accountant for your tax preparation purposes. Having aprofessional prepare your taxes can multiply your deductions because they knowwhere to look for them.