5 Tax Breaks You Don't Want To Forget
Now that tax season is in full swing, most Americans are trying to find every last deduction and credit that applies to them to reduce their tax burden, or hopefully to maximize their refund. Here are a few often overlooked tax breaks you don't want to miss.
Are you claiming all of your charitable contributions?
It's not big secret that you can claim any cash or gifts that you donated to charity. However, many people forget to claim the little expenses, which include any costs you incur while performing a charitable act.
For example, if you drove 20 miles each way to a Goodwill store and donated some old furniture, the IRS allows you to deduct 14 cents per mile. Did you mail a monthly check to your favorite charity? Those 12 stamps qualify as a deduction. If you are a frequent contributor to charitable organizations, it may be worth checking out the full IRS guidelines.
Moving expenses: more than you think!
If you moved this year for a new job, or a change in location for your current job, most of your out-of-pocket expenses are tax deductible. Your new workplace must be 50 miles further from your old home than your previous job, and you must work full-time for at least 39 weeks during the first year following your move. The full list of rules and limitations can be found here.
While a lot of taxpayers know that moving expenses are deductible, few actually take advantage of all of the deductions to which they are entitled. Almost everything is deductible besides meals, so make sure to save all of your receipts. If you rented a truck, paid movers, stayed at a hotel on the way, paid tolls, bought packing supplies, or incurred any other incidental expenses, you could significantly reduce your tax liability.
Did you serve jury duty?
This is a very little-known tax deduction that may not be worth tons of money, but hey, every little bit helps. If you served on a jury last year, and your employer paid your full salary while you served, chances are that you were required to turn that money over to them. The catch is that jury duty pay is reported to the IRS as taxable income, and a lot of people forget to write it off as an itemized deduction.
Sales tax or state income tax?
Most people know about this one, but which should you choose? In states where there is no income tax, it's a no-brainer, but in most states you have a decision to make here.
The IRS provides tables that show how much sales tax you can deduct, but if you made certain major purchases like a vehicle, you can add the sales tax you paid to the total. The IRS even has a calculator that helps you estimate the deduction before you file your taxes.
When it comes to state income taxes, of course you can deduct the state taxes withheld from your paychecks, but don't forget about last year! If you ended up owing the state money when filing your 2012 return (which you paid in 2013), that can be added to the total. For self-employed individuals and those in higher tax brackets, this could be huge.
The retirement tax credit
In my opinion, this is one of the single biggest reasons that younger people should start early when saving for retirement. This credit is no good for those taxpayers who have adjusted gross incomes above $28,250 ($56,500 for couples), but it's great for lower-income individuals.
If you qualify, you get a credit of 50% of up to $2,000 in retirement investments that you make throughout the year, in addition to the tax benefits that come with IRAs. In other words, after you get the credit, it's like paying $1,000 for a $2,000 investment for your future!
Now, put that big refund to work!
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