Don’t Miss Out on These 6 Valuable Tax Deductions
Although some three-quarters of filers get a refund from the IRS, tax experts say too many of us fail to claim all the deductions we’re entitled to. Rather than leaving money on the table as you scramble to finish your taxes by the April 18 deadline, make sure you're not overlooking a write-off that could save you money. Here are some common reasons you could be eligible for an easy-to-miss deduction:
You got a new job: If you had to move halfway across the country for a new job, save that U-Haul receipt and the statement from your gas card. If you have to move more than 50 miles further away from your home than your old job was, you can deduct the cost of moving expenses. This holds even if you’re just starting your career. “Moving expenses for someone’s first job are deductible,” says Richard Baum, a CPA and tax partner at Anchin, Block, & Anchin. Even if you have been in the workforce for decades, job-search expenses such as coaching, resume services, and travel costs may be deductible too—even if you don’t get the job.
You worked hard: One of the biggest overlooked deductions is the earned income tax credit for low- to moderate-income earners, says Lisa Greene-Lewis, CPA and tax expert at TurboTax. "Only one in five people eligible actually take that credit," she says. "It’s a huge credit," she says, but many eligible families don't realize their income falls underneath the qualifying threshold. For 2015, families with three kids could still earn up to $53,267 and be eligible. Even a single parent raising a single kid could earn up to $39,131 last year and claim the credit. Better yet, adds Greene-Lewis, "It's a refundable credit. You don’t even need to have tax liability to get those big tax credit amounts back."
You bought your own health insurance: For self-employed people, health insurance premiums are an “above-the-line” deduction, meaning it lowers your income even if you don’t itemize deductions and instead take the standard deduction, Baum says. The same is true for half of your self-employment tax. And for all taxpayers, long-term care insurance premiums are tax-deductible as medical expenses.
You gave away money: Most people understand the gist of deducting charitable contributions, but many taxpayers don't realize is that certain charity-related expenses are also deductible, says Greg Rosica, partner and contributing author for Ernst & Young’s EY Tax Guide. "Say they participate in a bake sale — ingredients for baked goods can be deducted," he says, adding that many taxpayers also don't realize you can deduct the mileage when driving to and from a charitable function.
Another point regarding charitable contributions for this year: Baum says that if you want to donate to a charity and you have an investment portfolio, it’s better to give appreciated stock rather than write a check. “Give that stock away in kind, get a tax deduction for the higher value, and never pay a capital gains tax,” he explains.
You're educating kids: "For teachers, to the extent that they buy classroom supplies, there's a deduction," Rosica says. It's also an above-the-line deduction, so if you're a educator who buys your own classroom supplies, you can write off up to $250 even if you don't itemize. Rosica says many taxpayers don't realize this deduction is still in place because it was set to expire, only to have lawmakers revive it and make it retroactive to cover the 2015 tax year.
You're saving for retirement: Another deduction only one in four eligible taxpayers take is the savers credit, Greene-Lewis says. "That’s one of the only places the IRS lets you double dip." Contributions to retirement accounts are pre-tax, but you can also get a credit of up to $1,000 (twice that for married couples filing jointly) if you contribute to an IRA, 401(k) or similar retirement savings vehicle, provided you fall within the income thresholds of $30,500 for single filers or $60,000 for married couples filing jointly.