Web Extra: 3 Commonly Overlooked Tax Deductions
With tax day right around the corner, more Americans than ever are wondering how they can maximize their deductions to save money. Tax attorney Roni Deutch reveals the following commonly overlooked deductions:
1) JOB HUNTING EXPENSES: It pays to save your receipts for job-hunting expenses because they are deductible as a miscellaneous itemized expense if used to find a new job in a similar line of work. Money spent on searching for employment such as printing resumes, transportation to and from interviews, outplacement agency fees, travel expenses (i.e. hotels, food, rental cars, air travel), and telephone and cell phone bills are tax deductable. Even moving expenses are deductible once you find a job.
* Please note, the IRS wants you to look for your new job either while you still have your current job or very quickly after you left your old job. If there was a substantial break between your last job and the time you finally got off your butt to look for your new job, they're not going to let you take any deductions.
* Also, expenses are only deductible if you itemize them on your tax return, so you can't take the standard deduction. And you can only deduct expenses that exceed 2% of your adjusted gross income. So if you had an AGI of $30,000, you can only deduct expenses over $600.
* Finally, your expenses will not be deductible if your new employer reimbursed you for them. In some cases, the employee can report the expenses to the employer and get reimbursed 100% under an accountable plan. In some circumstances (rare), your employer may report this reimbursement to the IRS as income. If they do so, please report it as income however include the amount as part of your job hunting expense deductions.
2) COST OF TAX PREPARATION: Tax tools, books, classes, software, and even tax preparation services are deductible on your tax return as a miscellaneous itemized deduction.
3) MEDICAL EXPENSES EXCEEDING 7.5% OF ADJUSTED GROSS INCOME: You can alleviate some of the pain by deducting your doctor bills. However, since medical bills are deductible only to the extent that they total more than 7.5% of your adjusted gross income, timing your payments may be the only way to garner a tax benefit from these costs. By the end of the year, you will know where you stand with your total adjustable gross income. But you may want to resist squaring any medical tabs until next year, when the tax benefits could be more advantageous. However, if you know your medical bills will exceed 7.5% of your adjusted gross income, then put your entire medical bill onto a credit card by the end of the year instead of making payments. This will ensure that you receive as large as a deduction as possible.