• Taxes & Insurance

Overlooked Tax Deductions & Credits

March 21, 2017 | Amin Dabit, CFP®

From April to June last year, airline baggage fees added up to more than $1 billion for U.S. airlines. What exactly does that have to do with your taxes? Well, if you travel for work and can deduct your airline ticket, you can also deduct those baggage fees.

Every dollar counts when it comes to taxes. Even though many IRS deductions and credits are relatively small amounts individually, they can add up to substantial savings for those taxpayers who diligently track their costs and understand deductions and credits.

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Here are a few more IRS deductions and credits that are often overlooked:

  • State sales tax: Did you know you can choose to deduct either state income tax or state sales tax. That’s important if you live in a state that doesn’t have a state income tax. It’s also important if you make a large purchase, such as a car, boat or recreational vehicle, and you usually just deduct your state income tax. For that one year, you might want to deduct your state sales tax, instead. Just do the math and pick the most favorable result.
  • Foreign tax credits: Don’t skip this one, especially not if you own mutual funds. Your 1099 forms might reveal that you are paying more foreign taxes than you imagined—particularly if you imagined that you were paying none.
  • Child care credit: Even if you pay for childcare with pre-tax dollars, you may be able to claim a credit for some childcare costs exceeding the $5,000 maximum for your pre-tax plan.
  • Job-hunting costs: If you are looking for a job in your same line of work, track your expenses. If you itemize, you can deduct all sorts of expenses, such as printing costs for resumes, postage, food, lodging for out-of-town searches, and many more associated costs. They will need to be over 2% of your AGI to be able to deduct them.
  • Moving expenses for a new job or job location: Did you move more than 50 miles away to take a new job? You can cut your tax bill by deducting reasonable moving expenses. And, you don’t need to itemize to benefit from these deductions.
  • Military reserve travel expenses: If you are a member of the military reserve or National Guard, you can deduct several expenses associated with your commitment. This is another deduction you can take even if you don’t itemize deductions.

There’s lots more to know about each of these tax deductions and credits, as well as how taxes impact all aspects of your life, from retirement to education savings.

Learn more about taxes and how they fit into your holistic financial life by reading our free Personal Capital Tax Guide for Holistic Financial Planning.

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This blog is for informational purposes only and is intended to offer guidance; not specific legal or tax advice. Clients are advised to consult their personal estate attorney and CPA before taking action based on this advice.

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