NOTE: The federal tax filing deadline for individuals has been extended to May 17, 2021, but not all states have moved their tax filing date. Yours may still be due by April 15, 2021. Keep in mind that quarterly estimated tax payments are still due on April 15, 2021. Keep updated on 2021 taxes will Michael Callahan!
Are you taking advantage of all of the tax deductions available to you? If not you could be missing out on extra money in your pocket. Here are some tax deductions that you might not know about even though they could potentially apply to you.
You might have the option of deducting sales taxes or state income taxes off your federal income tax. In states that do not have a state level income tax, this can be a big money saver. If you paid state taxes on a big purchase like an engagement ring or a car, the sales tax break might be a better deal for you. You do have to itemize to take the deduction rather than take the standard deduction.
If your home was struck by a natural disaster during the year and federal aid was issued, you could be eligible to deduct uninsured costs you paid out of pocket.
Tax Savings for Teachers
Most teachers have to reach into their own pockets every now and then to purchase items they need for the classroom. Qualified K-12 educators are able to deduct up to $250 for materials, or up to$500 if you are married to another teacher. This gets subtracted from your income, so you can take advantage of it even if you don’t itemize.
Most taxpayers realize that they can deduct money or goods given to charitable organizations. Other out-of-pocket expenses for charitable work can also qualify. For example, if you make cupcakes for a charitable fundraiser, you can deduct the cost of the ingredients used to bake them. It does helps to save the receipts or itemize the costs in case of an audit. You may also be able to deduct the cost of transportation to a charitable event.
The tax code does offer a number of deductions geared toward college students, but that doesn’t mean those if you have already graduated that you are not eligible for a tax break as well. The Lifetime Learning credit provides up to $2,000 per year, taking off 20% of the first $10,000 you spend for education after high school in an effort to increase your education. This does phase out based on your income levels but does not take your age into account, so check to see what you are eligible for.
If you land a new job and have to move for it, you can deduct what you spend packing and moving your belongings as well some costs for storage, insurance, transportation, and lodging associated with the move. There is not a limit to these deductions, however your new job must be at least 50 miles farther from your home than your old job was.
Refinancing Mortgage Points
When you buy your home, you can often deduct the points paid to obtain your mortgage all at one time. If you refinance a mortgage you have to deduct the points over the life of the loan. This means you can deduct 1/30th (the number of years of the loan) of the points a year. That works out to be $33 a year for each $1,000 of points you paid. It may not seem like much, but why not take every deduction you can. Also, the year the loan is paid off (because you sell the house or refinance again) you get to deduct all the points you have not yet deducted, unless you refinance it with the same lender.
There are a lot of deductions that you may not be aware of, which is why it is important to hire a professional tax preparer and ensure that you talk to them about your life. There are deductions that they may be aware of that apply to you, but if you don’t have a discussion about your individual circumstances, they won’t be able to help you make the most of them.