5 Things You Didn’t Know Were Tax Deductions
Just like having good credit can save you money, tax deductions also save you a lot during tax time. Many taxpayers fail to enjoy these benefits because they do not know that some of their everyday activities can generate many dollars back for them. It is important that you are aware of everyday tax deductions because it can boost your tax condition in two ways: Your taxable income can be lowered by tax deductions, and tax credit has a direct way of reducing the taxes you owe. There are some things that are widely overlooked by so many people, and these things definitely have great effect in the reduction of tax. Do not waste your money when it comes to taxes just because you are not aware of certain expenses that are tax deductions. It may look surprising to some people as I take you through the top five (5) things that you didn’t know were tax deductions.
Did you ever know that taking care of a stray dog makes you qualify to enjoy tax deductions? Did you know it is also possible to enjoy tax deductions when you buy contact lenses or you travel, even searching for another job. In a severe economy, it is paramount that your net disposable income is maximized. Below are some unexpected or overlooked ways to save some cash through tax deductions.
This is one subtle way through which tax deduction can be made possible. You can enjoy tax deductions in contact lenses but unfortunately just a few number of taxpayers are aware of this because such cost can be only deducted to the degree such that unreimbursed expenses are more than 7.5% of your AGI (Adjusted Gross Income). An example is that if your Adjusted Gross Income is $20,000, there would be need for you to spend above $1,500 in doctor fees to be eligible for this exemption.
The purpose of these lenses must be related to medical issues for you to take advantage of this deduction. Other colored lenses just for the purpose of fashion are not taxable. According to an IRS Publication, “the cost of materials and equipment such as enzyme cleaner and saline solution required for the use of contact lenses can also be included for tax deductions.”
When searching for jobs, costs like food, cab fares, transportation and lodging are deducted from your tax
According to Bankrate, when job hunting, tax deductible costs include, “resume services, telephone calls, employment & outplacement agency fee, travel expenses, placement fees for add you requested for, and the cost of printing as well as mailing search letters.”
Although these items seem exhaustive, there is need to bear in mind some limitations. The first thing to keep in mind is that this law is only applicable if and only if you are in search of a new job within the same field as your previous one. So if you were previously an engineer and you desire to relocate to another city to live your dream of becoming a film producer, then you do not fall among those that are to enjoy this benefit. Also, this privilege is not enjoyed by fresher who just graduated and has never made any impact on the internal revenue of the country.
This law is taken very serious, and for you to enjoy the benefit of tax deductions, you must not forget to present all receipts and details of your travel expenses. The Internal Revenue Service (IRS) is very careful and meticulous about ensuring that you are intensely looking for a job, and not gallivanting with your friends and dropping off resumes wherever is close to your vacationing spot.
Looking after stray animals
Although this is a viable means of enjoying tax deduction, some key things need to be put in place before you can enjoy this benefit. So many people have been deprived of this by the court because they did not follow the right procedures to experience tax deduction. Below is a story of a young man who missed out of this because of ignorance or probably negligence of what he ought to have done. Read the story and morale from it:
Story: Recently, a court went against the wish of a Los Angeles man who requested for tax deduction for spending below $250 for looking after feral cats. There was no evidence or letter given to John Mark from the charity saying the money spent on the animals was for their benefits. Morale: if you are looking after stray cats, make sure all receipts are well kept, and request from the shelter you are working with to draft out a letter stating how they have benefited from you through your spending.
Relocation costs for your very first job
According to Internal revenue Service Topic 455, “if you relocated because of a shift in your business or job location, or due to the fact that you have commenced with a new business or job, it may be possible for you to minus your moving expenses. But this has nothing to do with the expenses of your meals.” To be eligible for this, your new work location must be 50 miles or more farther from your former home than your former workplace was from your former home. Also, you must be an employee that work for a minimum of thirty-nine weeks in the first twelve months following your relocation to the area of your latest job.
There are special rules that are also applicable to military and international moves. Also, this is not applicable to recent graduates.
Energy saving improvement for home
It is possible for you to receive up to 100% tax credit on some home improvements that help to save energy in your main residence. The cap on this reduction is $500, but it is not dependent on your income.
Although this tax credit appears to be lucrative, it has been drastically reduced since 2010. It used to be $1,500 but was later amended since Barack Obama extended the George Bush era of tax reduction.