It is absolutely essential to include all available deductions on your income tax return. Deductions are the key to reducing your taxable income. However, many taxpayers are not fully informed on all of the deductions available to them and miss valuable opportunities to save money. Below is a list of some of the most commonly overlooked deductions.
Medical Expenses
If your total medical expenses for a year total 7.5% or more of your adjusted gross income then you can deduct the expenses from your taxable income. Although the total percentage required may seem high, if you carefully plan elective surgeries or other high medical expenses you can easily meet the requirement.
State Sales Tax
The IRS allows you to deduct your total state income taxes paid or your total sales tax paid. If you live in an area without state or local income taxes then deduct your total sales taxes paid.
College Tuition
The IRS allows you to deduct up to $4,000.00 paid in college tuition on yourself, your spouse, or any dependents. This break can be especially beneficial to taxpayers whose income is too high to qualify for the Hope or Lifetime Learning credit.
Smaller Charitable Contributions
People hardly ever forget to claim the big charitable contributions they make, but the little things also add up. Ingredients you use when preparing treats for a bake sale or purchases from a school fundraiser can be deducted. You may also deduct up to 14 cents per mile if you drive your car for a charitable reason.
State Taxes Paid the Previous Year
If you paid additional taxes to the state in the previous year then you can deduct those expenses from your current income tax return. You can also deduct state income taxes withheld from your paychecks or quarterly payments.
Jury Payments Forfeited to an Employer
Many employers who continue to pay an employee's full salary while they are serving jury duty request that the employee forfeit their jury payments to the company’s treasury. If you served on jury duty this year and your employer forces you to forfeit your jury payment, you can deduct the total from your taxable income.
Cost of Tax Preparation
Any expenses paid to prepare your tax returns can be deducted. This includes tax software and actual tax preparation services. However you need to include these costs in the tax year you paid them. Thus, you would claim your 2005 cost of tax preparation expenses when completing your 2006 tax return.