Overlooked Tax Deductions When Filing Income Taxes Return

So many people are in such a hurry to file their tax return, and rightly so, because it's money that is very well needed. Understandably, there are those who are no so much in a hurry, because they have to pay in, and who wants to do that? Most everyone has some type of knowledge of the basic credits. There are however, many other ways to find deductibles and credits when filing that some may not know they can claim. They may not even be aware of the changes that have been made on limits, amounts of, and types of credits and claims for filing this year.

Some common deductions and credits that most people are aware of are:

• Claiming as Head of Household
• Health deductions
• Contributions to a Retirement Account
• Contributions to a Savings Account
• Child Care Expenses
• Dependent Care
• Educational Expenses
• Employment Related Expenses

CLAIMING HEAD OF HOUSEHOLD: Any person running a house and paying more than half of the expenses is eligible to file as head of household, and this benefits the individual by possibly placing them into a lower tax bracket in certain jurisdictions.

HEALTH CARE DEDUCTIBLE EXAMPLES:

Certain medical and dental expenses such as dentures, hearing aids, prescription glasses or lenses, are all deductible. Funeral and/or burial costs, over the counter medications , and personal products are examples of non-deductible items.

Business Owners have always been allowed deductions of health insurance premiums for themselves and family members, and for 2010, then can also deduct the cost of those health insurance premiums in calculating self-employment tax on Schedule SE.

This is a "Hidden" write off on the 3rd line of Schedule SE. You are simply asked to add your self-employment income from the 1st and 2nd lines and then deduct the amount claimed on line 29 of your 1040 (your health insurance premiums) and enter the net amount on line 3. The fact that it is not pointed out clearly on the form makes it very easy for many self-employed individuals to overlook it unless you're aware of it.

CHILD AND DEPENDENT CARE CREDIT:

You may receive credit for childcare expenses that are not reimbursed. This credit varies in amount between 20% to 35% of $3,000 for each qualifying child or dependent under the age of 13.

CLAIMING DEPENDENTS:

Exemptions equal about $3650 for tax year 2010 and is the deductible amount allotted per person listed on your tax return. Thiscan include a spouse, children or other dependents, or parents. With so many benefits being associated with claiming dependents, it's very important ot make sure you really are eligible to claim them on your return.

Qualifying dependents basically need to meet 1 of 2 criteria: 1- qualifying child / 2-qualifying relative. A few guidelines to help:

• Qualifying child rules ALWAYS take precedence over qualifying relative rules.
• Both sets of rules are made to award ONLY 1 taxpayer the dependent credit.
• Dependent must live at same residence as taxpayer claiming them for more than half of the year.
• IRS will always audit tax returns where more than 1 person has claimed the same dependent, and only 1 of those people will win. The cost to the one who does not win, is more costly than anyone should want to risk.
• Learn more about Qualifying Child Rule and Qualifying Relative Rule.

JOB EXPENSES RELATED CREDITS AND DEDUCTIBLES:

There are a number of work related expenses that people rarely think about claiming. They may seem small, and unsubstantial, but they add up throughout the year none the less. Here are some examples of work related expenses that qualify for deductions:

• If you use a vehicle to run work related errands, you may qualify for gas, repair, and even mileage deductions. (must own or lease the vehicle)
• Work Uniforms that aren't reimubursed
• Tools if this applies in your work field
• Continuing Education
• Gasoline to drive to work
• Dues you may pay for Unions or Professional Organizations
• If you dedicate a room in your house for just business use, you may qualify for a deduction on relevant office expenses, as long as the office use is at the convenience of the employer.
• Moving expenses for a 1st job that you have to move more than 5o miles for.
• JOB HUNTING EXPENSES: If you are unemployed, or were in 2010, and were job searching. Keep track of all expenses. If you were looking for a position in the same line of work, you may qualify for deductible for cost of miscellaneous expenses if you itemize, but only to the extent that the total of these exceed 2% of your adjustable gross income. Does not apply if searching for 1st job. These misc. expenses include but are not limited to; food, lodging transportation (if overnight) cab fare, employment agency fees, cost of resume printing, and any other job promoting advertising etc.
• If you are a Military Reservist or National Guard, you may receive a tax deduction for travel expenses to drills or work related meetings if you travel more than 100 miles and are away from home overnight. If you qualify for this, you can deduct the cost of lodging, plus 1/2 the cost of your meals, and also 0.50 cents per mile. Then add parking fees, and tolls as you get this deduction regardless of whether you itemize or not.

If you're still with me, I promise it gets better. Tax talk is so much un-fun, I know. These I'm about to list may be of benefit to you. I was very surprised at some of these, I'd never heard about, and now I'm kicking myself for not keeping records of some of these qualifying deductibles.

1. EMPLOY YOUR CHILDREN: If you're a business owner, big or small, and you have children, give them a job and write off their salary. It's beneficial for both parties, as they learn the value of work, and they have fun earning their own money. Great way to teach Kids about finances.....Some business owners tend to overlook that their children are permitted by law to work in family owned businesses and the salary is fully tax deductible. Even if you just have a small business, craft making ladies...assign your child a job to help you sell your crafts.
   
2. GIFT TAXES AND CHARITY DONATIONS: Significant monetary gifts to children, family members or even friends are subject to a gift tax. This means you can give a monetary gift to say, your spouse, up to $13,000, and write it off as cash gift. Gifts more than $13,000 are subject to taxing. If you're overly blessed and want to give back, an individual may donate up to $13,000 each. You can give it all to one charity, or split it up and share with several, then write it off.
3. MARRIAGE TAX BONUS: You probably are aware of the penalties that newly married couples are faced with when they file jointly. However, this can be avoided if there is a large difference in the amount of income between the 2. Generally, couple's in the higher income brackets with equal or comparable incomes are subject to penalty. If you're income is considerably different, once averaged, it may place the higher earner into a lower tax bracket, making it possible for a couple to be eligible for a marriage tax bonus credit.
4. DELAY PAYING YOUR TAXES UNTIL THE FOLLOWING YEAR: If you're a self employed independent contractor and you want to delay paying your taxes on you current earnings, you may be able to put off at least some of your balance until the following year. If you've worked under contract during said year, but have yet to be paid for it, you can wait to submit payment until after the 1st of the year, and it will be legal.
5. MORE TAX DEDUCTIBLES: Interest on student loans and mortgages; penalties for early or late payments also qualify.
   
6. TURN 65 IN 2010? If so you now deserve a larger standard deduction.
   
7. ESTATE TAX ON INCOME IN RESPECT OF DECEDENT: Sounds a little much I know, but if you put just a little time into this, it can save a lot of money if you inherited an IRA from someone whose estate was large enough to be subject to federal estate tax.
8. AMERICAN OPPORTUNITY CREDIT: This has been extended through 2012 for up to $2500 of college tuition and related expenses throughout the year. AND...it covers all 4 years of college. The full credit is available to individuals with modified adjusted gross income of less than $80,000, or $160,00 if filing jointly. If credit exceeds your tax liability, it is partially refunded.
9. JURY DUTY?? If you served on jury duty in 2010 and work for one of those companies that requires you to turn over your jury duty pay, (I didn't know that happened) then on your 1040, line 36 is the place to put the amount you had to turn over....deductions that get their own line.
10. ENERGY SAVING HOME IMPROVEMENTS: If you made home improvements for the purpose of saving energy, you may qualify for credit, and can claim equal to 30% of the cost of your improvements, up to $1500. This limit applies to 2009 and 2010 together.
    
11. CASUALTY AND THEFT LOSS DEDUCTIONS: You may qualify for deductions if you own property that has been damaged either by natural disaster or theft.
12. STANDARD DEDUCTIONS HAVE ALL BEEN INCREASED
    

I mentioned a couple of business type tax deductions above. Here are a few more having to do with office or business expenses:

1. HIDDEN OFFICE EXPENSES: Not only can you claim larger expenses on your taxes, but there are a number of smaller expenses that qualify also. Computers, desks, chairs, file cabintes all can be written. Even more than that are credit card fees,ATM fees, bank charges or incurred interest fees on your business accounts. I never thought about these, but add any business related publications from magazines, to business cards, to newspaper ads you name it.
   
2. PARTY IT UP! Business owners can use costs of office parties as deductible. As long as ALL employees are invited, any party you want to have pretty much qualifies. You can also claim private business parties to entertain or network with clients, or business partners.For this you may deduct up to 50% of the expenses.
3. ACHIEVEMENT AWARDS: Companies are allowed to give away 3 separate awards to its employees each year, with each one being worth up to $1600. Does not apply to monetary awards, but pretty much anything else. Sports equipment, TV, Fitness Gifts, Cookware, etc, as long as it's not cash.

Every person who earns taxable income must file a tax return.  Why not make sure that you are getting the bast possible results whether paying in, or getting back.  It could be a huge difference in the amount of money you save or receive.  It's better to familiarize yourself with the facts because you may not have a tax preparer who is as knowledgeable, or as willing to take the extra time to check all the possibilities. For all and any information you may need on this topic, visit www.irs.gov, 

IRS Website / Wikipedia / E How / About.com / Wiktionary / Kiplingers