Yesterday I put together a list of common federal income tax deductions, so today I thought I’d follow up with a list of commonly missed tax deductions and/or income adjustments that I dredged up from various corners of the internet. While there’s a bit of overlap with yesterday’s list, there are a number of new items, as well.
Non-cash charitable contributions. As I’ve noted in the past, you can get yourself a nice tax deduction by clearing out your house and donating all of that extra stuff to charity. Just be sure to get an itemized receipt, and if any individual item is worth more than $500, get it appraised. Note that, if you drive your car for charity work, you can also take a mileage deductions.
New points on refinancing. Any points that you pay when you refinance can be deducted (on a monthly basis) over the life of the new loan.
Old points on refinancing. All unamortized mortgage points left over from prior years are deducted all at once if you end up refinancing your mortgage in any particular year.
Moving expenses to start your first job. While job hunting expense while search for your first job are not deductible, your moving expenses are, even if you don’t itemize. If you move more than 50 miles, you can deduct expense related to getting yourself and your stuff to your new location (including mileage).
State sales tax. This deduction makes the most sense for people that live in states without income taxes because you have to choose between the two (sales tax vs. state income tax). The good news is that you don’t have to save receipts all year long to get this one — you can opt to use a tabled value instead but, even if you do, you can still claim certain major expenditures (such as sales tax on a new car) as long as you have supporting documentation.
Health insurance premiums. Health insurance premiums, along with longterm care premiums, get added to your unreimbursed medical expenses and will be deducted to the extent that they exceed 7.5% of your AGI. But self-employed individuals can deduct 100% of their health insurance premiums if they’re not covered by an employer-paid plan. You don’t even have to itemize to take this one!
Child care credit. If you pay someone to take care of your kids such that you can work you might qualify for a tax credit. This is true even if you claim your childcare-related expenses through a tax-favored reimbursement account at work. The reason for this is that such accounts are capped at $5,000 while expenses up to $6,000 can qualify for the credit.
Educator expenses. Qualified educators can get a $250 “above the line” deduction for as much as $250 for the purchase of educational materials. Here again, you don’t have to itemize to take advantage of this one.
Student higher education expenses. If your AGI is less than $65k ($130k on a joint return), you can deduct as much as $4,000 for higher education expenses. And like self-employed health insurance premiums and educator expenses, you don’t have to itemize to take advantage of this. You should also check to see if you qualify for the Hope and/or Lifetime Learning credit, as these can end up being more valuable than the deduction.
Clean fuel credit. If you bought a new hybrid vehicle in 2007, you can get a conservation tax credit of $250-$1,000 and an additional fuel economy credit of $400-$2,400 (depending on the make and mpg rating). Unfortunately, the credits begin to phase out when an auto manufacturer sells it’s 60,000th hybrid. This is already happening for Toyota. I’m not sure about other manufacturers. (details)
Investment and tax expenses. Investment and tax planning expenses are deductible as miscellaneous itemized expenses to the extent that they exceed 2% of your AGI. Don’t forget about things like safe deposit box rentals, brokers fees, IRA custodial fees, investment publications, long distance calls to your broker, etc.
Retirement tax credit. Low and moderate-income earners can get a credit of as much as 50% of the first $2,000 that put into a retirement account. Yes, a credit, so it’s up to $1,000 off the top of your tax bill. Plus, you still get the tax deduction that would otherwise be associated with the contribution. Contribution to your 401(k), 403(b), SEP, Traditional, or Roth IRAs qualify, though your AGI has to be less than $25k to qualify ($50k for joint filers, and $37.5k for head of household).