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12 Common Tax Deductions Most Individuals Overlook Posted: 09 Mar 2011 09:27 PM PST Taxes are no doubt a huge topic of debate among people, especially among politics. However one thing is evident about taxes, and that is everyone is obligated to pay their taxes. Failure in paying or filing taxes can result consequently with harsh penalties. You don’t want to be the individual faced with such difficulties with the IRS. Did you know about 97% of citizens pay their taxes? The IRS mandates that every individual pay their taxes to ultimately help fund works from the Government. And the way the system is set up, it is better to come clean on “your own free will,” opposed to being caught by the IRS for tax evading. These are just some speculations you should take into consideration because tax evasion is sure not a fun issue, especially when being caught. At this point, you must be saying, “Okay, okay I get it. Just what can I do to legitimately reduce some of my taxes?” If you didn’t know, the government has some leeway on some individuals. If you fall into any of these categories, you can find yourself saving extra dinero in your wallet for whatever you please, legitimately. But just be wary of the fact that tax policies do change overtime, and in no way do tax policies stay permanent forever. Politicians are probably still battling it out as we speak. 1. Volunteer work If you didn’t know, the government recognizes those individuals who help volunteer on their own free time and enables them to be compensated for itemized sacrifices they have to make. For example, if you volunteer for driving people in the community to certain destinations, the government gives back $.14 for every mile you drive. Bottom line, keep good records of your charitable activities of certain financial sacrifices you have to make. Keep your receipts and if your contribution totals more than $250, realize you'll need an acknowledgement from the charity documenting the services you provided. Although it may not seem like you will be saving much, every bit counts. 2. Business trips If your job includes business trips, the price for boarding on an airplane or traveling in general can add up to be a rather hefty price tag. Keep documents of traveling expenses. Don’t throw away your receipts, or leave them in your coat pockets never to be seen again. Keep them stashed away in a safe location so you can send them for evaluation when tax season comes.  The government enables you to write these off as part of your miscellaneous deductions when you decide to file your tax report. You are allowed to write-off for shipping and baggage costs as part of your miscellaneous deductions as well. 3. Independent contractor If you are among one of the many unfortunate people who are currently unemployed, many seek freelance jobs on the web and file as being an independent contractor. Basically what this means is that the person is now filed as self-employed and it happens so that the government acknowledges the fact that these individuals do not have the same working station as those who are filed as dependent contractor. Thus, equipment necessary for your business can be considered tax deductible as long as it proves to be some use for your business. So to speak, it is the government’s way of encouraging individuals to start their own business. 4. Donate for a worthy cause If you didn’t know, you can donate stuff that you no longer need to charitable organizations in return for a tax deduction. This can include clothes that you are now too small to fit, electronics, furniture, appliances, and many other items. The only thing that the government requires is that for big ticket items worth more than $500, be appraised from an authorized appraisal company. Of course, this service will be tax deductible. 5. Networking for Cash The business of doing business as you travel means calls to connect with contacts, faxes to confirm orders and internet access to research information. When you pay a surcharge to stay connected, such as for hotel phone calls or coffee shop internet access, count that fee toward your miscellaneous deductions. Make sure to get itemized bills from your hotel and receipts of your networking transactions so you have solid records. You can even deduct 50% of the charge for the vanilla latte that kept you awake through your boss’s lengthy emails when traveling. You can deduct half of what you pay for business meals and entertainment not reimbursed by your company. 6. Hire a professional accountant Although hiring a professional accountant isn’t considered a tax deduction, it may be a smart move on your part during times of uncertainty. Professional accountants study the ever changing tax policies and know things that you may not. Thus, if you are having difficulties and have reason to think you may be eligible for certain tax deductions, it may be the difference of saving hundreds from the IRS, legitimately. The service fee itself generally pays itself. 7. American Opportunity Credit This tax credit, which has been extended through 2012, is available for up to $2,500 of college tuition and related expenses paid during the year. The full credit is available to individuals whose modified adjusted gross income is $80,000 or less ($160,000 or less for married couples filing a joint return). The credit is phased out for taxpayers with incomes above those levels. It also covers all four years of college, and if the credit exceeds your tax liability (regular and AMT), it is partially refundable. 8. Student loan interest paid by the parents The government encourages parents to send their children off to college. And one of the many ways they are doing this is by easing their taxes if those parents decide they are in need of a student loan. Parents who are filed jointly and have a modified adjusted gross income of less than $100,000 annually, are eligible to deduct $2,500 without any liability whatsoever for either parties, off their student loan. Modified adjusted gross incomes between $105,000-$130,000 are still eligible to receive tax deductions, except they should expect less than the full $2,500. 9. Job-hunting costs If you're among the millions of unemployed Americans who were looking for a job, keep track of your job-search expenses. If you're looking for a position in the same line of work, you can deduct job-hunting costs as miscellaneous expenses if you itemize, but only to the extent that the total of your total miscellaneous itemized deductions exceed 2% of your adjusted gross income. 10. Moving expenses for your first job The government now compensates you $0.16/mile, and in addition, the price of tolls and parking fees if your first job is at least 50 miles from your original home. If you qualify, you can also deduct the cost of getting yourself and your household goods to the new area. 11. Credit for Child Care Missing an opportunity to save on tax credit opposed to missing a tax deduction hurts much more because credit is looked upon dollar by dollar and can save you tremendous amounts of money. Whereas tax deductions, is always subject to evaluation to figure out the final calculation. Parents who have children who are filed as dependent under the age of 12 and cannot care for themselves, are eligble to receive funding from the government up to $6,000 in child care. For more information on the credit for child care, I definitely recommend reading this article from About.com. 12. Health insurance deduction for business owners It has always been the case that business owners are able to receive a tax deduction on health insurance for themselves and their family. It just happens so that the place to write this off in the tax form in line 3 of Schedule SE, is pretty concealed. Hidden enough that a normal person would not figure out that line 3 may be where they would add their information for a deduction if they qualified because they do not provide an extra line. Another word of advice is to not go through all the headache and try to “game” the system. Generally the IRS do not approve of any type of scheme that operates to bypass their tax system and eventually these schemes just ends up causing the individual more headaches, more hoops to jump through, and a greater risk of being audited by an IRS agent. Everybody has to contribute a fair share to ensure the government is able to facilitate to its fullest capabilities. That is how our current system works. The only real way to lower your taxes is to take advantage of these savings when given the opportunity. 12 Common Tax Deductions Most Individuals Overlook is a post from: Moola Days

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