3 Tax Deductions That You are Overlooking
Don’t overpay taxes by overlooking these tax deductions. See the 3 most common deductions taxpayers miss on their tax returns so you can keep more money in your pocket.
1. 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 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.
2. Child care tax 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.
But it’s easy to overlook the child care credit if you pay your child care bills through a reimbursement account at work. Until a few years ago, the child care credit applied to no more than $4,800 of qualifying expenses. The law allows you to run up to $5,000 of such expenses through a tax-favored reimbursement account at work.
Now, however, up to $6,000 can qualify for the credit, but the old $5,000 limit still applies to reimbursement accounts. So if you run the maximum $5,000 through a plan at work but spend more for work-related child care, you can claim the credit on up to an extra $1,000. That would cut your tax bill by at least $200.
3. Refinancing mortgage 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 lend [/sociallocker]