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My family was selected to host a House Party Turbo Tax celebration this February. We had a BLAST working on our taxes with this great software! You really need to check it out! It is so simple and leads you right through the whole process! As someone that is new to doing taxes on my own, this was a piece of cake!
Check out the 10 Most Overlooked Tax Deductions Edits from House Party and Turbo Tax.
1. State and Local Sales Tax Deduction
This tax deduction is a huge benefit for those taxpayers who live in states that don’t have a state income tax (like Texas and Florida), because now taxpayers can chose whether to deduct state income tax or state and local sales tax. Even if you pay state sales tax you can chose to deduct state and local sales tax if you made large purchases like a vehicle, boat, or furniture. Don’t worry about the calculations, TurboTax will figure out your state and local sales tax deduction and which deduction gives you the most money back in your pocket. Just have your receipts for your purchases ready when you sit down to file your taxes.
2. Out-of-Pocket Charitable Contributions
It’s hard to overlook the big charitable gifts you made during the year by check or payroll deduction. But the little things add up, too, and you can write off out-of-pocket costs you incur while doing good deeds. Ingredients for casseroles you regularly prepare for a nonprofit organization’s soup kitchen, for example, or the cost of stamps you buy for your school’s fundraiser count as a charitable contribution. If you drove your car for charity in 2014, remember to deduct 14 cents per mile.
3. Student Loan Interest
In the past, if parents paid back a student loan incurred by their children, no one got a tax break. To get a deduction, the law said that you had to be both liable for the debt and actually pay it yourself. But now there’s an exception. If Mom and Dad pay back the loan, the IRS treats it as though they gave the money to their child, who then paid the debt. So a child who’s not claimed as a dependent can qualify to deduct up to $2,500 of student loan interest paid by Mom and Dad.
4. Moving Expense to Take First Job Here’s an interesting dichotomy: Job-hunting expenses incurred while looking for your first job are not deductible, but moving expenses to get to that first job are. And you get this write-off even if you don’t itemize. If you moved more than 50 miles, you can deduct 23.5 cents per mile of the cost of getting yourself and your household goods to the new area, (plus parking fees and tolls) for driving your own vehicle.
5. Child and Dependent Care Credit
A credit is so much better than a deduction- it reduces your tax bill dollar for dollar. So missing one is even more painful than missing a deduction that simply reduces the amount of income that’s subject to tax. The Child and Dependent Care Credit can be worth a credit up to $$1,050 for one child and up to $2,100 for two children or more, but it’s easy to overlook if your childcare bills are paid through a dependent care benefit plan. If your employer provided dependent care benefits you may be able to exclude the amount provided from your income. Your employer can tell you if the plan qualifies.
6. Earned Income Credit
Millions of lower to middle income people miss out on this every year. 25% of taxpayers who are eligible to take the Earned Income Credit fail to claim it according to the IRS. Some people miss the credit because they aren’t aware they qualify. The EITC is a refundable tax credit – not a deduction- ranging from $496 to $6,143 and is dependent on your income, marital status and family size. In order to qualify you also have to earn money from working either for an employer or being self-employed sometime during the year. In order to get the Earned Income Credit, you have to file your taxes, even if you don’t owe any money. Moreover, if you were eligible to claim the credit before and didn’t, you can file or amend your previous tax returns to claim a tax refund within 3 years of the return due date.
7. State Tax You Paid Last Spring
Did you pay state taxes when you filed your 2013 state tax return in 2014? Then remember you can include the amount you paid for your state taxes in 2014 with the state income taxes withheld from your paychecks or paid via quarterly estimated payments if you itemize your deductions.
8. Refinancing Points When you buy a house, you get to deduct points paid to obtain your mortgage all at one time. When you refinance a mortgage, however, you have to deduct the points over the life of the loan. That means you can deduct 1/30th of the points a year if it’s a 30-year mortgage—that’s $33 a year for each $1,000 of points you paid. Doesn’t seem like much, but why throw it away? Also, in the year you pay off the loan—because you sell the house or refinance again—you get to deduct all the points not yet deducted, unless you refinance with the same lender.
9. Jury Duty paid to Employer
Some employers continue to pay employees’ full salary while they are doing their civic duty, but ask that they turn over their jury fees to the company. The only problem is that the IRS demands that you report those fees as taxable income. If you give the money to your employer you have a right to deduct the amount so you aren’t taxed on money that simply passes through your hands.
10. Reinvested Dividends
This isn’t really a deduction, but it is a subtraction that can save you a lot of money. And it’s one that many taxpayers miss. If, like most investors, you have mutual fund dividends automatically invested in extra shares, remember that each reinvestment increases your “tax basis” in the fund. That, in turn, reduces the amount of taxable capital gain (or increases the tax-saving loss) when you sell your shares. Forgetting to include the reinvested dividends in your cost basis—which you subtract from the proceeds of sale to determine your gain—means overpaying your taxes. TurboTax Premier and Home & Business tax preparation solutions include a very cool tool—Cost Basis Lookup—that will figure your basis for you and make sure you get credit for every dime of reinvested dividends.