Millions of taxpayers have overpaid their taxes throughout the years. Many of these same taxpayers are unaware of these deductions, so it is important to work with your tax preparer at James Wells EA MBA Tax Office in Santa Cruz, CA, to be sure that you are taking advantage of all of the deductions to which you are entitled. Below we discuss just a few of these often overlooked deductions.
State Sales Tax
Congress offers individuals the option to deduct the state income tax or state sales tax paid throughout the year. You therefore have the option of choosing the one that gives you the largest deduction. Working with your tax professional, you can determine which is the best route for your return. If your state does not collect an income tax, then you will need to take advantage of the sales tax option.
However, even if your state does collect income tax, it still might be worth exploring the state sales tax option. Your tax preparer can access the IRS tables and online calculator to determine how much sales tax you can deduct. Large purchases with sales tax, such as a boat or vehicle, can also be added to increase your deduction. Again, working with your accountant or tax professional can help you make the best choice regarding this deduction.
Reinvest Dividends
If you have your mutual funds dividends automatically reinvested, you need to be sure that you report your basis accurately. This is because with every reinvestment, you are increasing your tax base in the fund itself. Therefore, your taxable capital gain or your potential tax-saving loss is also increased. If you are unsure what your current basis is in the fund, ask them for assistance. Funds have been required to report their basis to their investors and the IRS annually since 2012.
Again, it is important to work with your accountant or tax professional at James Wells EA MBA Tax Office about the options you have regarding your dividends and any reinvested funds.
Student Loan Interest Paid by Parents
Student loans are typically taken out in the name of a child versus the parents. If this is the case, then your child can take advantage of the student loan interest paid throughout the year. They can use it as a deduction, even if their parents footed the bill during the year. The reason is that the debt is not in the parents’ name, so they are not liable. A student also does not have to itemize in order to take advantage of this deduction.
Job Hunting Costs
If you looked for a new job in your chosen field, track your job hunting expenses. Even if you did not land a new job, you can still deduct the expenses as long as they exceed 2% of your adjusted gross income. Keep in mind that looking for your first job in a chosen field does not qualify. Below are some of the deductible costs you should track through your search:
As you can see, there are plenty of additional deductions within this category. Work with your tax preparer to determine if you have enough expenses within your job hunt to qualify for this deduction.
Military Reservists’ Travel Expenses
As a member of the National Guard or another military reserve, you have the option to deduct the costs of travel both to training weekends, other drills and any meetings. However, you must travel over 100 miles from your home and be away overnight. What can be deducted as part of these expenses?
A positive is that you do not need to itemize to take advantage of this deduction, so it can be used along with your standard deduction.
These are just a few of the potential deductions that are often overlooked by the average tax payer. By working with a tax professional, you can be sure that you are receiving all the deductions you are eligible for. Call or click the link below to contact an accountant or tax professional at James Wells EA MBA Tax Office in Santa Cruz, CA, to determine your eligibility for these and more deductions.
James Wells EA MBA Tax Office