With tax season just around the corner, hopefully you’ve already started thinking about your year end taxes. April might seem like it’s forever away, but the sooner you begin planning, the more chance you have that you’ll be able to take advantage of all the tax benefits. You might not think that you need to sit and plan to be able to take advantage of all the tax deductions for 2018, but there are several that you wouldn’t even begin to image could be deducted. We’ve compiled a list of several items that you may not have known could be deducted on this year’s taxes.
1. Charitable donations and contributions
It’s better to give than to receive, and the IRS thinks so too. Donating to a qualified charity might gain you a tax break from the IRS, reducing your taxable income and lowering your tax bill. In order to receive the tax deduction from the IRS the total of your itemized deductions has to exceed the total of the standard deduction you would have received for your filing taxes.
2. Student loan interest…even paid by Mom & Dad
If you’re paying student loans in excess to 4% interest and you’re not taking advantage of this tax break, you’re not getting your full benefit. The student loan deduction allows you to deduct up to $2,500 of the interest paid and is available to anyone that earns less than $80,000 filing individually, and less than $165,000 filing a joint return. Your student loan must have been for a student that was enrolled at least half time in a program that would lead to a degree or certificate.
3. State tax you paid last tax season
If you ended up owing and having to pay state and local taxes for your last year’s taxes, you may be eligible for a deduction. This tax must have been placed on you specifically, and you aren’t able to claim this deduction if it was imposed on one of your dependents. You must have also paid this tax for the tax year in which you are filing. For example, if you owed state and local taxes in 2017 and paid them in 2018, you’d be eligible to itemize your deductions and claim them.
4. Local or state sales tax
The IRS only allows you to either deduct your local or state sales tax or income tax but won’t allow you to deduct both. If you live in the great state of Texas, like so many of us do, or another of the 7 states with no income tax, this won’t be an issue for you. Although, if you live in any of the other 43 states you might want to consider which deduction would be more beneficial for you. You would be able to deduct your local and states sales tax on big purchases that you made during the year, like a new car or a major appliance
5. Compensation from jury duty
If you have the privilege of being selected for jury duty many employers will still pay you for the day you miss while serving. Although, they may require you to hand over the compensation you received while on jury duty, since they continued to pay you your salary for the day. If this is the case, you are able to take a tax deduction on the compensation you received from jury duty and paid back to your employer.
6. Teacher tax savings
Paying out of pocket expenses is nothing uncommon when it comes to our educators. Teachers are constantly buying things for their classroom to create fun and unique learning experiences for your children. The good news for them is that they can deduct up to $250 individually, and up to $500 if they’re married to another teacher.
7. Child and Dependent Care Credit
Paying the babysitter, daycare center or camp that you sent your kids to over the summer can be expensive. Luckily, under the Child and Dependent Care Credit you are able to deduct up to 35% of qualifying expenses $3,000 for one of your children or dependents, and up to $6,000 for two or more. There are certain qualifications that must be met in order for you to receive this deduction.
• You and your spouse must have been working and earned income for the tax year in which you are filing.
• You have sole physical custody or be the main caregiver for the dependent.
• You must have the filing status: Single, head of household, qualifying widow or widower with a qualifying child, or married filing jointly.
• The person providing childcare can’t be your spouse, another dependent or the child’s parent.
• The child or dependent must be under the age of 13 or must suffer from a mental or emotional disability and are unable to care for themselves.
8. Medical and dental expenses
Medical expenses can sure burn a hole in your pocket, especially if they were unforeseen. The IRS is providing some relief to those that have had to medical and dental expenses that exceed 7.4% of your adjusted income and will allow it to be claimed as a deduction.
9. Casualty, disaster and theft losses
If you and your family have suffered from a casualty, disaster or theft loss you may be able to claim this as a deduction. The only way that you’d be unable to claim this as a deduction is if the casualty, disaster or theft losses has been covered by the insurance.
10. Job hunting costs
Job hunting can be stressful enough on its own, let alone having to handle all of the expenses that go along with it. Luckily, the IRS will allow job search deduction to help you out. The one major aspect you need to focus on though is that your job search must be within your field. For example, you wouldn’t be eligible if you went from a job in the marketing field to education. Below is a list of eligible expenses that can be deducted.
• Resume preparation – Make sure you keep all the receipts for hiring someone to professionally rewrite your resume.
• Phone calls with potential employers whether you get the job or not.
• Gas, mileage and other travel expenses that you accumulated while interviewing.
• Moving costs after you’ve finally landed that new job that might have sent you halfway around the country.
11. Home renovations
Don’t get too excited, you can’t deduct that new pool you just added, or your basement that you just refinished and turned it into a new family room. Home renovations that were made to accommodate a medical disability can be claimed as a medical deduction. For example, if you had to renovate your house to be more handicap accessible you’d be eligible for this medical deduction.
12. Gambling losses
Paying taxes on your gambling winnings can be frustrating, especially if the amount you won is less than the amount you lost. Luckily, the IRS will allow you to deduct your gambling losses from your winnings. You will just need to keep a detailed diary of all your losses and winnings and make sure that you include your winnings as taxable income.
Your detailed diary must include:
• Date and type of gambling
• Business name and address where you were gambling
• The people that you were gambling with
• The amount you won and lost
Other documentation to prove gambling losses:
• W-2G form
• 5754 form
• Receipts from the casino
13. Unusual business expenses
Some crazy things have been claimed and deducted from business expenses. If you can document why something is beneficial for your business, you can deduct it from your business income, regardless how unusual it may seem.
Gurian helps owners of large businesses manage their taxes so that they can focus on running their company. If you need help with your corporation’s taxes, contact us today at 469-374-3150.
By Paige Knight