Portfolio Perspective

Overlooked these deductions and credits? Then you have overpaid Uncle Sam

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At last count, upward of 45 million Americans itemized deductions on their 1040 forms, claiming $1.2 trillion in tax deductions, according to automated DIY tax-preparation firm Intuit TurboTax. By way of comparison, taxpayers claiming a standard deduction accounted for $747 billion. If you took what Intuit called "the easy way out" by taking the standard deduction, or just didn't know about all the itemized deduction options — as well as tax credits — available to taxpayers, you may have seriously shortchanged yourself and given Uncle Sam an undue bonus. CNBC.com shares the top overlooked tax deductions according to both Intuit TurboxTax and Bankrate.com.

— By CNBC.com's Kenneth Kiesnoski
Posted 8 February 2017

State sales tax

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Writing off state sales tax makes sense, mainly for those living in jurisdictions without a state income tax. For residents of states that do levy an income tax, the state income-tax deduction is usually a better deal. The Internal Revenue Service offers tables showing how much state sales tax can be deducted, as well as a calculator to determine deductions based on state of residence and income level.

One often overlooked factor in state sales tax deductions is that said tax paid on home-building materials and vehicles, boats and airplanes can be added to the IRS deduction provided it does not exceed the general state sales tax rate.

Source: Intuit TurboTax

State tax paid last year

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If you owed tax when you filed your 2015 state return last year, include that amount with your state tax itemized deduction on your 2016 return, in addition to state income taxes withheld from paychecks or paid through quarterly estimated payments.

Source: Intuit TurboTax

Reinvested dividends

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Many taxpayers miss this opportunity to save. If you have mutual fund dividends automatically invested in extra shares, each reinvestment ups your so-called tax basis in the fund — which reduces taxable capital gain (or increases the tax-saving loss) when you do sell your shares. If you forget to figure reinvested dividends into the cost basis, which is subtracted from proceeds of sale to come up with your gain, you'll overpay in tax.

Source: Intuit TurboTax

Charity cases

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Few people forget to deduct the large checks they wrote for favorite charities, but how about those smaller cash expenses toward the same or other causes? You can't deduct the value of time spent volunteering, but if you bought supplies for a charitable organization — such as soup kitchen ingredients, rolls of raffle tickets for a school fundraiser or buying and regularly cleaning a hospital volunteer uniform — count it as a charity donation. And remember, if you drove your own car for charity work, deduct 14 cents per mile traveled.

Sources: Intuit TurboTax and Bankrate.com

Student loan interest — paid by Mom and Dad

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Once upon a time, you had to be both liable for a student loan debt and then pay it back yourself in order to get a tax-return deduction. No more. Now if parents pay back their child's education loan, the IRS regards it as if they'd given money to their offspring, who then paid the debt. Thus, a child not still claimed as a dependent can deduct up to $2,500 of student loan interest paid off this way.

Source: Intuit TurboTax

Educational expenses

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It can pay to get educated. The IRS tuition and fees deduction takes as much as $4,000 off taxable income and doesn't require itemization. The lifetime learning credit provides some students or their parents a credit of up to $2,000. In addition, the American opportunity tax credit, created as part of President Obama's 2009 stimulus package, offers dollar-for-dollar tax breaks of up to $2,500. It was made permanent with passage of the Protecting Americans from Tax Hikes Act of 2015.

Sources: Intuit TurboTax and Bankrate.com

Job-hunting costs

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If you're already employed but are looking for a new job in your field of expertise, you can deduct costs associated with the search. Eligible expenses include fees for résumé preparation and placement agency services, both deductible as long as you itemize. However, the costs must exceed 2 percent of adjusted gross income before they result in any savings.

Source: Intuit TurboTax

Moving expenses to take a first job

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You can't deduct expenses to find your first job fresh out of college, but you can write off some of what it costs you to get there once you land it — if you're moving far enough. If you have to relocate more than 50 miles away from home to take the position, 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," reports Intuit. You can find more information about this tax break in the Adjustments to Income section of Form 1040.

Sources: Intuit TurboTax and Bankrate.com

Child- and dependent-care tax credit

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The child- and dependent-care credit allows you to run up to $5,000 of such expenses through a tax-favored reimbursement account at work, but in reality $6,000 in spending now qualifies. Running the maximum through a plan at work and claiming an extra $1,000 spent otherwise can save up to $200 annually.

Also, many parents forget that the credit can cover child-care costs during the summer for expenses such as day camp expenses. Overnight camps don't qualify. Lastly, remember the credit is not just about kids. If you have an adult dependent whose care you must pay for in order to work, you can claim those expenses under this tax credit.

Sources: Intuit TurboTax and Bankrate.com

Earned Income Tax Credit (EITC)

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A full quarter of Americans eligible for the Earned Income Tax Credit don't claim it, says the IRS. Some miss out because the rules are complicated, while others just don't know they qualify. The EITC is a refundable tax credit ranging from $506 to $6,269 for 2016. It's meant to supplement wages for low- to moderate-income workers, according to Intuit, but is applicable to many "middle class" Americans, too. You might now qualify because you lost a job, took a pay cut or worked fewer hours last year. The size of your EITC refund will depend on factors such as income, marital status and family size. You can file at any time of year to claim an EITC refund for up to three previous tax years, notes Intuit. To claim the refund, you must file a tax return even if you don't owe any taxes in 2016.

Source: Intuit TurboTax

Refinancing mortgage points

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Homeowners who refinance a mortgage can deduct points paid over the life of the loan. They can deduct 1/30th of the point annually on a 30-year mortgage, which comes to $33 a year for each $1,000 of points paid. Intuit notes that while that might not seem like much — why throw any money away? Also, in the year you pay off the mortgage, advises Intuit, you can deduct all points not yet deducted, unless refinancing with the same lender.

Source: Intuit TurboTax

Jury duty fees paid to employer

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Some bosses will pay your full salary while you do your civic duty and serve on a jury, but they also often ask that you turn over any jury fees paid to you during that time. The problem? The IRS regards those fees as taxable income. You can deduct the amount of fees turned over to your employers so you're not taxed on money that, as Intuit puts it, "simply passes through your hands."

Source: Intuit TurboTax

Military reservists' travel expenses

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If you're a member of the National Guard or military reserves and travel more than 100 miles and overnight for training, you can deduct related expenses on your return. Included is the full cost of accommodation and half the cost of meals. Log your miles if driving, as they're deductible in 2016 at 54 cents per mile. Parking fees and tolls are also deductible. No need to itemize this deduction on your Form 1040, but you'll have to fill out Form 2106, according to Bankrate.com.

Source: Bankrate.com

Medical costs

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To help you clear the threshold required for claiming itemized medical expenses on tax returns — 10 percent of AGI for taxpayers age 65 and younger — keep track of your miscellaneous expenditures. Examples cited by Intuit include "travel expenses to and from medical treatments, insurance premiums you pay for from already-taxed income and even alcohol- or drug-abuse treatments."

Self employed and not covered by someone else's plan? You can deduct 100 percent of health premiums as an adjustment to income on your 1040.

Sources: Intuit TurboTax and Bankrate.com

Energy-efficient home improvements

A home improvement contractor works on a house in Cambridge, Massachusetts.
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Tax breaks for some relatively easy energy-efficient home improvements are available under The Nonbusiness Energy Property Credit. It offers tax breaks on easy home improvements that increase energy efficiency. If you made such upgrades in 2016 and haven't made claims since the credit was introduced 16 years ago, it could be worth up to $500 in tax savings.

Found on Part 2 of Form 5695, this credit requires adhering to certain spending limits, such as $150 for high-efficiency furnaces and boilers and $200 for replacement windows, says Bankrate.com.

Source: Bankrate.com

Disaster recovery

Chad Shields uses a kayak to deliver food to his parents after their home was flooded on October 7, 2015 in Summerville, South Carolina. The state of South Carolina experienced record rainfall amounts over the weekend and officials expect the damage from the flood waters to be in the billions of dollars.
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If your home was struck by a natural disaster that the federal government issued emergency funds for, you could be eligible to deduct uninsured costs you paid to rebuild your home and life on your 2016 tax return.

Source: Intuit TurboTax