5 Overlooked Tax Deductions from TurboTax
According to TurboTax, 51 million tax payers itemized their deductions in 2007 claiming over 1.33 trillion in tax deductions. While 91 million tax payers claimed the standard deduction and reduced their taxes by 654 trillion. Now the numbers do look very good for the standard deduction tax payers but if you don’t look at both deduction methods when preparing your taxes, you could be missing out on some very good deductions.
For five often overlooked federal tax deductions look at state sales taxes paid, reinvestment dividends, charitable contributions, student load interest, and moving expenses related to a job.
State Sales Taxes Paid
For those that live in states that do not have a state income tax, you can deduct state sales tax. And often those that do file for a state sales tax deduction overlook such things as automobile sales tax, sales tax on a boat or an airplane and sales tax on home building supplies. The deduction does phase out around $250,000 for a couple, but is well worth looking into for those lucky tax payers that pay no state income tax.
If you sold a mutual fund during the tax year and think you have decent capital gains to pay on the fund proceeds, make sure to calculate reinvested dividends properly. Your basis or the amount you paid for the investment increases every time dividends are reinvested. Therefore, you capital gain might not be as large as you first thought.
Small items that you purchased in the process of doing volunteer work for a charity are deductible just like larger checks made directly to organizations. Keep track of mileage you drove and small purchases made for charity, they will add up when you file your taxes.
Student Loan Interest
Student Loan Interest paid by parents of a student are now deductible as if they loan payments were made by the student. The IRS considers the loan payment a gift to the child and the child as paying the loan payments. Quite a nice treat to reduce and often eliminate all tax liability for the student.
If you started your first job during the tax year and needed to travel more than 50 miles to get to the location of your new job, you can deduct the costs of moving and the cost of driving. You cannot deduct the expenses needed to secure your first job, but you can deduct the costs to get to the new city where you will begin your career.