The Nine Most Overlooked Tax Deductions You Should Know


The Nine Most Overlooked Tax Deductions You Should Know

Tax deductions reduce the amount of taxes you owe to the IRS and ease the financial burden you face when you file your returns each year. However, some of the most lucrative eligible deductions are overlooked simply because most taxpayers do not know about them. You could lower your tax obligation and even get a refund by claiming these deductions if you are eligible for them. 


1. Employment-related Expenses 

In certain circumstances, the IRS allows people to deduct the costs of working or looking for work during a tax year. Some of the work-related costs that you can include on your return this year include: 

  • the price you pay for your work uniform
  • mileage spent looking for a new job
  • the cost of printing off resumes
  • 50 percent of meal expenses incurred while traveling for work

You can also deduct moving expenses if your work is transferring you to a new location that is more than 50 miles from where you currently live and work. You can deduct the costs of renting a moving truck, packing expenses, and other costs that you incur while moving because of a job transfer. 

2. Medical Expenses 

You also may be eligible to deduct some of the medical expenses you paid during this past tax year. For instance, if you joined a weight loss group after being diagnosed with Type II diabetes, you can deduct the group's membership fee from your return. 

Likewise, if you underwent major surgery because of an illness like cancer, you can subtract the cost of the operation on your returns. You should note that elective surgery is not included in this deduction. You also will need to provide proof of your medical condition to the IRS if requested to verify your right to take this deduction on your return. 

3. Gambling Losses 

You may be eligible to claim a deduction for gambling losses if you were involved in legal gambling and won money or prizes during that tax year. You can only deduct an amount that is less than or equal to the amount of money or prizes that you won, however. 

4. Home-related Expenses 

You may also be eligible to claim expenses that you incurred with either buying or owning a house during the tax year. Some of the most common homeownership deductions come from the costs of improving or making a home safer. For instance, if you paid to have lead paint removed from your house, you could deduct those costs from your tax return. 

If you incurred expenses involved with making your house more energy efficient, you may be allowed to take those costs off your taxes this year. In particular, you can deduct up to $500 of adjustments made to improve your home's energy efficiency. Likewise, you can deduct up to 30 percent of the cost of energy efficient appliances from your taxes. 

Additionally, the IRS may allow you to deduct some of the expenses that you paid to get or refinance a mortgage. For instance, you can deduct up to $2000 from your taxes if you qualified for a mortgage credit certificate from your local or state government. 

Moreover, you can deduct the expense of points that you paid to refinance your home. The points must be included with the costs of completing that transaction. Further, you must file a Schedule A (IRS form 1040) in order to get credit for those points. Finally, if you are in the military and purchased your first home this tax year, you could be eligible for the Military First-time Homebuyer's Credit. 

5. Retirement Contributions

One of the best ways to lower what you owe the IRS each tax year is to contribute to an eligible retirement savings account. Your contributions to your employer-sponsored 401k can be deducted from your return. Likewise, any contributions you made to a Roth IRA can also be subtracted from your total tax debt this year. 

6. Sheltering a Foreign Exchange Student 

Hosting a foreign exchange student can be a rewarding experience in a variety of ways. Along with exposing your family to a new culture and language, you also are allowed to deduct the costs you incur for the student's shelter and housing. 

The IRS will permit you to deduct $50 for each month that you sheltered the foreign exchange student. To qualify for this deduction, however, the student must have lived with you for at least 15 days for each month that you take this deduction.

7. Section 179 Depreciation 

When you run your own business or are self-employed, you can deduct the costs of certain office equipment that depreciates rapidly in value. Specifically, to claim this deduction, you must purchase and own a new serviceable asset that will have a useful life of less than 20 years. 

You can write off all of the equipment's depreciation in a single tax year. This deduction typically applies to office equipment like computers, printers, and other small machines. 


8. Travel for Charitable Organizations 

If you travel on behalf of a charitable organization within the tax year, you can deduct the costs that you incur for that travel. The IRS will allow you to deduct the mileage that you pay for traveling from the organization's building, job site, or other drop off location. You will need to submit receipts and other proof of the mileage to claim this deduction. 

9. American Opportunity Tax Credit 

If you have enrolled in and taken college courses during the tax year, you may be eligible to claim the American Opportunity Tax Credit on your return. You can claim up to $2500 of your college tuition and other related expenses. The credit is refundable, which means you will get it back from the IRS in a tax refund that year. 

Deductions allow you to lower what you owe to the IRS. They also may boost the amount you get back in a refund. These deductions are among the most commonly overlooked by taxpayers as they file their returns each year.New Call-to-Action