Every year, millions of dollars go to the IRS instead of back into taxpayer’s pockets. So, before you file your next tax return, here are a few of the most overlooked tax deductions.
1. Moving Expenses for a Job
With unemployment still high, a lot of people have needed to go the extra mile, literally, to find work. What many people don’t realize is that moving expenses related to relocating for a job may be deductible. To qualify, you need to move at least fifty miles away from your old home, and you’ll need to work at your new job for at least 39 weeks after the move.
If you qualify based on the information above, you’ll then be able to deduct transportation and storage expenses. This may include hiring movers, renting moving trucks, storage units, tolls, parking, and so on. In addition, you may even be able to deduct lodging if the move is long and takes a few days to reach your destination.
2. State Sales Tax
The money you pay in state sales tax is a potential deduction, but it isn’t always worth taking. Those who can benefit most from this deduction are people who live in states that don’t have a state income tax. Every taxpayer has the option to choose between deducting state and local income taxes, or state and local sales taxes. Obviously, if you aren’t assessed a state income tax but still pay a sales tax, deducting the sales tax will almost certainly provide the greater benefit.
There are tables that give you deduction amounts based on income levels, but keep in mind that big purchases like cars, boats, and recreational vehicles count as well. So, be sure to keep good records of larger purchases which will help you determine if taking the state sales tax deduction is a better option.
3. The Earned Income Tax Credit
While nobody wants to find themselves in a low income situation, those who do have a nice tax credit available to them that often goes overlooked. The average earned income tax credit, or EITC, is around $2,000. Since this is a credit and not a deduction, that’s essentially like putting $2,000 into your pocket. And you don’t have to be strictly low income to qualify, because just losing a job halfway through the year could bring your income down enough to qualify.