We would all love to pay fewer taxes, or better still, get a refund. And it is possible, if you make the most of the deductions in each of the main areas of your life.
Looking for a new job can be costly in terms of time and money. Job hunting expenses such as resume services, training, photocopying, travel and so on are all eligible for tax deductions.
If you are working and have expenses necessary to do the job, you need to do the following:
All the deductions must be itemized
The deductions must be more than 2% of your gross pay
You can only claim the total deduction minus the 2%. So if you earn $100,000, your expenses have to total at least $2,000. If you have $5,000 in expenses, you can claim $3,000.
Union dues, maintaining your professional license, regulatory fees and so on are all deductible. In addition, you might be able to deduct industry-related subscriptions, further education and medical exams required for work. Teachers can deduct $250 for supplies. You can also deduct any unreimbursed travel costs related to your job, except for commuter costs. Keep all receipts in a safe place.
You can get a tax break for any dependents, plus other tax benefits, such as the opportunity to file as a head of household, eligibility for a child tax credit and/or an earned income tax credit.
Deductions are great, but a tax credit is even better, because it lowers your taxes directly rather than simply reducing your amount of taxable income. Make sure you have a Social Security Number (SSN) for every child in order to claim your credits.
These days, health expenses such as medical, dental, eye care, mental health care, and disability aids, can all add up - especially if you have a family. In the tax year 2016, you can deduct your health expenses if they exceed 10% of your gross income, or more than 7.5% if you or your spouse is over 65.
Most types of doctor are covered, including mental health professionals. Treatment at a nursing home, for addiction, or even for obesity (if prescribed by a doctor), is covered.
Other items that can all add up include:
Other expenses that may be deductible are insurance premiums you paid for policies that cover medical care, and the cost of a qualified long-term care insurance policy if you are paying additional premiums beyond what is offered as a benefit by your employer.
Most homeowners can deduct all home mortgage interest. If you have more than one home and are renting it, you might be eligible for the mortgage interest deduction and a certain amount of the rent you are collecting.
If you work from home, you can claim a home office deduction. The IRS will usually send out an assessor to determine how much of a percentage you can deduct from your monthly mortgage payment or claim in relation to rent. Make sure the area you are claiming, such as a spare room, is used primarily, if not exclusively, for business purposes.