It’s that time of year again - tax time! These surprising tax deductions can help reduce your taxable income and cut your bill to the IRS. If you’re savvy about your taxes, you can save money and avoid cash flow issues.
Family Expenditures
- Health Insurance - If you’re self-employed and buy your own private health insurance, you’ve noticed the skyrocketing premiums. You can deduct up to 100% of these costs off of your total gross income, and, if your medical expenses add up to more than 7.5 percent of your adjusted gross income, you can itemize those, too.
- Sales Tax - Did you know you have the option of deducting either sales taxes or state income taxes from your federal income tax? So, if you’re lucky enough to live in a state that doesn’t have its own income tax, you can itemize sales tax as a deduction.
- Babysitters - If your babysitter is working while you volunteer for a known charity, you can list the cost as a charitable contribution.
- Charity - Speaking of charities, you may be able to itemize out-of-pocket expenses related to any charity work, like food and drinks served at a fundraiser, in addition to money or goods donated.
- Education - The Lifetime Learning credit offers deductions of up to $2,000 per year on education expenses after high school. There are specific requirements based on income level, but it’s open to people of all ages.
Work-Related Expenditures
- Social Security - If you’re self-employed, you already know you have to pay 15.3 percent of your income to the U.S. Government for social security and medicare taxes. The good news is you can deduct 7.65 percent off your income taxes, the amount typically covered by an employer.
- Business Expenses - All business expenses, no matter how off the wall, can be deducted from your business income as long as you can document how they benefit your company. So make sure you account for every single business expense you make.
- Teaching Expenses - It’s a well-known fact that teachers spend a lot of their own money on classroom supplies. If you’re a K-12 teacher, you can deduct up to $250 from your income for expenditures on materials.
- Job Search - Finding a job can get expensive, between the cost of printing resumes, posting on job search websites, and driving to interviews. If you lose your job and are looking for one in the same field, you can deduct any expenses over 2 percent of your adjusted gross income.