Come tax season, many people find themselves anxious and unprepared. While doing your taxes might not be a joyous task, there’s room for hope if you take advantage of some of the deductions and credits offered by the Internal Revenue Service.
With that in mind, here are eight commonly overlooked write-offs you should keep in mind this tax season.
The Earned Income Tax Credit was initially introduced to aid low income workers with children. However, the scope of the credit covers anyone making less than $52,428 annually. While the amount may vary depending on whether you have dependants, and how many of them, you might be able to claim it. Even individual filers can earn a credit of up to almost $500 on their taxes.
Because you are both proprietor and employee, self employment can come with a spectrum of additional concerns around tax season. Luckily for those running their own business, there are ways to mitigate some of the extra filing. On top of writing off any recurring expenses associated with your business, you can also claim a deduction if you regularly use any part of your home as an office.
When you file your taxes, take a look at where the bulk of your income went over the course of the previous year. If you made any big purchases in that time, you might get a larger deduction by opting to write off the state sales tax on those receipts rather than going with your standard state income tax deduction. This is generally the better option if your state does not automatically impose an income tax. The IRS website has more information on what items qualify.
Regardless of which year they were submitted, you can claim any fees you paid toward your state and local taxes in the year that you paid them. That means, in addition to writing off any income withheld for state or local taxes for the current year, you can also deduct any amount that you paid toward an outstanding balance on the previous year’s filing. You should also check to see if any of your income went toward mandatory contributions to any state and local funds, as you can claim those as well. You can find that information in box 14 on your W-2.
If you put money toward paying down the interest on a mortgage last year, whether as part of a refinancing plan or in the sale of your home, you can deduct a percentage of that payment equal to the percent of the mortgage’s interest that those payments covered. As long as you used your own money in the payments, and meet several other standards set by the IRS, you can write off those payments on your 1040.
While experiencing something like a fire is obviously not ideal, it is possible to find a silver lining around tax time if any of your prized possessions didn’t make it through the year. The IRS allows you to itemize and deduct any loss of value to your home or more expensive items that occurred in the last year. This can include the cost of any damage sustained in a natural disaster or the theft of an item. However, if the loss is covered by your insurance, you can only deduct loss sustained in excess of the insurance reimbursement.
Whether you committed to adding some solar panels to your roof and a small wind turbine in the backyard, or if you just replaced your old windows and added installation to your home, you are eligible for a tax credit equal to a percent of the cost of installation. For basic renovations like eco-friendly windows or roofing, the deduction is 10 percent of the cost of installation. However, there are certain parameters any addition must meet in order to receive the credit, and there may be some limits to how much you can receive for any one project.
Finally, if you were in the giving mood last year, you can itemize and claim any money or gift contributions made to charitable organizations, provided you have proof of your donation. Luckily, most charities and donation centers will offer a receipt of the actual or estimated value of any contribution you make.