Looking for more ways to save on your taxes? Every year, wage-earners overpay by trillions of dollars (collectively) because they fail to realize the many deductions they’re missing out on. Here are a few you might not know about that could save you hundreds (or thousands) of dollars this year.
1. State sales tax. You know you can deduct what you paid on last year’s taxes from this year, but did you know you can choose to deduct what you paid in sales tax instead? In general, you’ll get less this way. But if you purchased a big-ticket item in the last year (car, boat, building materials) you may be able to sub in sales tax and get a better return.
2. Roth IRA. If you contribute to an extra retirement fund, the money is considered pre-taxable income, so don’t forget to claim it come tax time.
3. Small charities. You’re sure to write off a large donation, like a car or a check contribution, but the little things (like donating clothes, toys, and furniture to the Rescue Mission or Salvation Army) can also pay off. Just make sure you get a receipt if you want to claim them.
4. Job-search expenses. Finally, the recession pays off! If you spent money in search of a job last year (driving, hotels, printing, related fees), you can list it as a deduction. The restrictions are that it can’t be your first job and your deductions have to total more than 2% of your adjusted gross income (if you’re not working, this shouldn’t be too difficult).
5. Estate tax on an IRA. If you received an inheritance in 2010 that included an IRA and you had to pay estate tax on it, you can deduct that amount from your taxes, which is especially helpful if you get bumped into the next tax bracket.
6. Jury pay. If you’re lucky enough to have an employer that continues to pay your salary while you’re engaged in jury duty, you are required to turn over your jury pay as recompense when you receive it. However, you still pay income tax on it, so be sure to write it off.
7. American Opportunity Credit. This has replaced the Hope credit for those attending college, and it gives you even more benefits (applies to up to $2,500 in tuition and related expenses for individuals earning less than $80,000/year and couples earning less than $160,000).
8. Energy-saving home improvements. You can always claim home improvements, but if you include some environmentally-friendly renovations, you may be able to double dip. The credit applies to up to 30% of expenses (up to $1,500) for the following items: biomass fuel stove, high efficiency furnace, central air, or water heater, and energy-saving windows and doors.
9. Head of household. If you recently became single and you have a dependent living with you, claiming your status as “head of household” instead of “single” may offer you additional savings on your taxes. Same goes for “surviving spouse” (within 2 years of loss).
10. Dependent parents. If you care for your parents and pay more than half of their living expenses, you can claim them as dependents (just like children). If you split costs with siblings so that all of you contribute more than half of your parents’ living expenses, then you will have to work out an arrangement to decide who claims them as dependents each year.
Leon Harris writes for AdvanceMe, the nation’s leading business cash advance provider.
