Over 45 million individuals and families claim itemized deductions on their 1040s, which adds up to $1.2 trillion dollars in deductions. On the flip side, the tax payers who claim standard deductions only account for $747 billion. If you fall into the standard deduction category, it’s likely that you shortchanged yourself. This year don’t overpay on taxes by overlooking the following four tax deductions.
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State sales taxes.
Do you live in a state that doesn’t require income tax? If so, you must decide whether you deduct state and local income taxes or state and local sales taxes. Typically the income tax deduction puts more money in your pocket. The IRS has tables for residents in these states detailing how much money they can deduct. Don’t forget to factor in vehicle, boat, and airplane purchases as well as home building materials.
Out-of-pocket charitable contributions and other expenses.
Most people declare their large charitable gifts but forget about their smaller expenses. For example, if you bought ingredients to make a dessert for a church dinner or you paid for stamps for a school fundraiser mailing, you can deduct these expenses. You can also deduct 14 cents per mile for the miles that you drove your own car for charitable functions.
Technically reinvested dividends aren’t a tax deduction. However, they are a subtraction that can save you a lot of money. Do you have mutual fund dividends that are invested in extra shares without you having to do anything? Each reinvestment boosts your “tax basis” in the fund. Subsequently you have less taxable capital gain when you sell the shares.
Jury duty paid to your employer.
Some employers will pay full salary for their employees while they are completing their civic duty and then require their employees to turn over their jury fees to the company. The only issue with this system is that the IRS expects you to report these fees as taxable income. If you turn the money back over to your employers, you can deduct it so that you aren’t taxed for it.
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