10 Most Commonly Missed Tax Deductions

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Tax Deductions are your money, don’t miss out on it

We’re coming to the end of tax time once again… and for those of us who do our own taxes that means zeroing in on every tax deduction possible.  At this point in my life I don’t have many out of the ordinary deductions, which makes filing easier from year to year.

The tax deductions I frequently claim include:

  • Donations to charity
  • Mortgage interest
  • Property taxes
  • Student loan interest

In fact, these four main deductions account for 97% of all our deductions combined!  That said, regardless of the amounts every deduction is important, worth finding, and worth using.

In the spirit of hunting for every possible deduction I wanted to bring to your attention an awesome article resource I found while poking around on the TurboTax website entitled The 10 Most Overlooked Tax Deductions.’

Top 10 overlooked and commonly missed income tax deductions

Use this brief list to get ideas and follow the links to read about each one in greater detail.

  1. State sales taxes – useful for those living in states with no income tax. {read more}
  2. Reinvested dividends – easy to miss if you automatically reinvest your mutual fund dividends.
  3. Out-of-pocket charitable contributions – be sure to include mileage and other lesser considered contributions to charitable organizations.
  4. Student loan interest paid by Mom and Dad – the IRS now treats this as a gift to children.
  5. Moving expense to take first job – fresh out of college?  move more than 50 miles away?  this deduction is for you.
  6. Child care credit – useful if your child care costs exceeded your tax-favored reimbursement account at work.
  7. Earned Income Tax Credit – a substantial credit for low-to-moderate income workers that is very frequently missed.
  8. State tax you paid last spring – you are eligible if you owed state income taxes after filing last years return.
  9. Refinancing points – points from refinancing can be deducted equally each year for the entire life of the mortgage.
  10. Jury pay paid to employer – make sure you do not pay taxes on jury fees you must turn over to your employer.

Some of these are deductions while some are actually credits.  Some can be quite substantial while others tend to be small.  Regardless of the size or type… if you can reduce the amount of tax you owe then you would be a fool not to do so.  Hopefully this article will help a few DFA readers keep more of their hard earned money where it belongs… in their own pockets!

Don’t miss these deductions

Before reading these tips I had forgotten about a donation of cash and mileage to the Salvation Army – topic #3 above helped remind me to claim it!

1 Lakita (PFJourney)

Matt,

I don’t know how many military readers you have, but some state / counties offer tax exemptions for military members who were deployed last year. I haven’t been able to find a consolidated list of all areas that offer this, but anyone who is a home owner and deployed may want to look into this.

Kita

2 Matt Jabs

Thanks Lakita!

3 Joe

You should set up a Paypal account on your blog for people to “Buy Matt a coffee for all the help he gives me”

Charge em like 3$ and use the money to go towards debt.

* Of course I get a 10 percent commission as it is my idea.

4 holly

Thanks for this. I didn’t know you could deduct mortgage points.

5 Matt Jabs

I found the list very useful and am glad to provide it here. :)

6 JoeTaxpayer

holly – points on purchase are fully deductible. Points on the refi are taken over the life of the loan. If the loan is paid off early, and you are good with your records, you take the remaining amount in the year that loan is paid off, whether it’s due to a sale or another refinance.
Joe

7 Matt Jabs

As always Joe, thanks for your knowing, and sharing the details. :)

8 Budgeting in the Fun Stuff

We use a CPA, but I love lists like this so I can see if she found all the deductions possible (so far, she’s golden). Thanks for the list!

9 Forest

I must admit my laziness led me to claim no tax breaks on my last taxes… I fully intend to do everything I can next year!

10 Jason@Frugal Real Estate

#6.Property tax deduction for non-itemizers is a big one. Those with a mortgage, but opt to take the standard deduction rather than itemize the mortage interest deduction, often forget that you can still deduct property taxes. Too bad it probably goes away in tax year 2010.

11 BG

Would like to hear more on this one (property tax deduction for non-itemizers) — I thought it was gone for 2010. Any tax expert able to confirm?

12 JoeTaxpayer

Yes, not available for 2010 returns. I thought as much, but confirmed with the experts at TurboTax.

13 Matt Jabs

Thanks gents… I updated the post accordingly. God bless.

14 Awareness Home Funding

Nice list and always helpful this time of year. It’s not something we tend to think about until now. Our blog just listed much of the same, but we also included links directly to the IRS site where each topic is discussed in case you’d like to read the info first hand.

15 Fred @ One Project Closer

Hi Matt, I was surprised to see state income taxes as not on the list of the top 4 – that’s really surprising! I would have expected these taxes to outperform charitable deductions, since I understand the average giving in the U.S. is between 1-2%, whereas I think the average state income tax is much higher.

16 Matt Jabs

Hey Fred, yeah state income taxes are definitely something we should not forget to file, but I do not think they are commonly missed… do you?

17 Nashville Homes

Another point to mention in regards to mortgage deduction is the deduction for mortgage insurance premiums or MIP. Currently, I believe up untill 2012 you can deduct the mortgage insurance on your loan if you purchased or refinanced in or after 2009.

18 Michelle Traudt

Great post, thanks for the reminders!

19 Jenna

Charity is key, especially when it comes to gas mileage. Thanks for the reminder.

20 Charles

Thanks for the insightful article. I only wish Jury pay was more than the few dollars/day the state gives… that often times employer would want reimbursed to them.

21 The Debt Free Baby

I just posted a blog about taxes, I mentioned that the education credits are missed frequently.

22 Steven-H

I know most people don’t forget medical expenses. But what they DO forget is that mileage to & from hosptals, pharmacies, doctors, ect. is also deductible.
If you don’t have an accurate measure, an educated guess will work ok.

23 kathleen

can you deduct any of these if you don’t itemize? and if you’re a renter, is there an advantage to itemizing? I donate a lot but I think the standard is like $5500, and I don’t donate that much!

24 Matt Jabs

Hi Kathleen, it all depends on your situation but you should definitely run the numbers to see if itemizing is beneficial or not.

25 Steven Lupton

I never heard about property loss deductions before. I suspect that many people don’t know about that. either. Sigh. Just another reason why you can’t fit tax forms on a postcard, and everybody gets stuck paying accountants to wade through needlessly complex tax forms.

26 Matt Jabs

Yep, one of the reasons to vote for Ron Paul is so we would no longer have to pay income tax!

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