5 Overlooked Tax Deductions
Taxpayers worry a lot about filling their federal income tax every year since most people forget or delay filling. You could be paying huge tax bills every year because you do not know how to manage the tax returns. As a taxpayer, you need to know that you are entitled to certain tax deductions that can help you reduce your tax bills. When you overlook such tax deductions, you continue becoming a victim of having to bill large amounts every time without earning yourself any refunds or reductions. You save more money and know what to claim before paying your tax liabilities when you have enough information about tax deductions. Below are 5 of the most overlooked tax deductions every taxpayer needs to know about.
1. Student Loan Interest
Anyone who has benefitted from student loans before must pay a particular interest once repaid the student loan. The interest is deductible under certain circumstances so long as you complete your payment. The tax deductions on the student loan interest depend on the total amount you have paid every year. Your income dictates how much interest deduction you can get and is usually approximately $2500.
2. Care Expenses or Care Tax Credit
Long-term care tax credits for both children and dependents are subject to tax deductions so long as you do not miss out on paying when needed. Your income is taxed directly, and care bills are deducted monthly. People with lower income are taxed in lower amounts than those with higher income. The tax deductions are applied if you have paid the car insurance for a specific period. The assumptions also differ depending on the age of the dependent. You should, however, note that the tax deductions are only applicable to those with traditional long-term care insurance covers.
3. Direct Donations Toward Charity
When making charitable donations, you will incur costs on every generous gift throughout the year. The out-of-pocket expenses as you make donations should be subjected to tax deductions. All donations in clothing, cash, household items, and car fuel qualify to be subjected to the deduction.
4. Earned Income Tax Credit
According to the IRS, the Earned Income Tax Credit should be subjected to tax deductions claims. Many low-income people are not aware that they qualify for this deduction. The EITC has several complex rules not understood by most people. If you are a low-to-moderate income earner, you should know that this tax credit is meant to be an additional wage and should therefore be refunded. Those without jobs, underpaid cuts, or having very few work hours in a year are also eligible to claim this refund on filing for tax returns.
5. State Sales Tax
Not all states in the US apply income tax on their taxpayers. People in such states are eligible for either state sales taxes deduction or state-local income tax deduction. There are two ways to file for tax refunds or deductions when living in such states. First, you can choose to claim for these taxes through the IRS tables or keep track of all sales taxes imposed on you throughout the year.
Conclusion
Tax deductions are an effective way of ensuring you get back your hard-earned money that has been subjected to tax. As a taxpayer, understanding the most overlooked tax deductions is important. Just learning more about whether you qualify for such deductions and claiming these deductions, will reduce your tax liability
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