Nobody enjoys giving money to the government, but getting some of that cash back in tax deductions makes the process a little easier. That said, some of these deductions are a little easier to overlook than others. Here are 5 things that are tax-deductible — and you may not know about them.
1. Health Insurance Premiums
It’s no secret that medical expenses can eat up a large chunk of your budget. The IRS is aware of this as well, which is why deductible medical expenses have to exceed 10 percent of your AGI (adjusted gross income) in order for you to itemize them.
If you’re self-employed, however, you may be eligible for a health insurance deduction, which allows you to deduct 100 percent of your premiums. Keep in mind that this is an adjustment to your gross income, and not an itemized deduction.
2. Babysitter Wages
Are you paying a babysitter to watch your kids while you’re working for a charity? If so, there’s a good chance you can write those costs off. According to the federal tax court, it’s possible to list babysitter wages as a charitable contribution. Of course, you’ll need a document that proves you were volunteering while she was performing her duties.
3. Sales Taxes
As you may know, you’re allowed to choose between deducting state income taxes or sales taxes off your federal income tax. If you live in a state that doesn’t have an income tax, this can be a big help. Even if you do pay sales taxes, the sales tax break is still a better deal in most cases. You’ll need to itemize this deduction, but the IRS provides a handy guide.
4. Uncommon Business Expenses
If you’re running a business, the list of things you can write off as an expense becomes quite sizeable. For example, let’s say you’re a junkyard owner. If you’re having rat or mice infestation issues, you may want to encourage stray cats to hang around. One way to do that is to buy cat food, which then qualifies as a business expense.
5. Lifetime Learning Credits
College students can count on various tax deductions, but even those who’ve already graduated can get certain tax breaks. One of them is the Lifetime Learning credit, which is equal to 20 percent of the first $10,000 you pay in tuition expenses.
Provided you have $10,000 in qualified expenses in a given year, this particular credit is worth up to $2,000 per year. It’s worth noting that the credit does phase out at higher income levels, but is available at any age.
To about more deductions that you possible claim, get in touch with our office.