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If you could pay less money on your taxes this tax season, wouldn’t you do what is necessary to make that happen? According to TurboTax, the most recent numbers illustrate that more than 45 million Americans claimed $1.2 trillion in deductions on their taxes. However, every year, millions of Americans also miss out on tax deductions that could ensure they are not paying more on their taxes than they should. From IRA contributions to student loan payments, these are tax deductions that can put more of your hard-earned money back into your pocket. Pay attention to these five overlooked tax deductions to make sure you are maximizing the amount you get back on your taxes.
- Tax-deductible IRA contributions. When you make IRA contributions in a traditional IRA, you can deduct them from your taxes. In 2017, your total contribution to your traditional IRA cannot be more than $5,500 ($6,500 if you are aged 50 and older). With a traditional IRA, your contributions may be limited if you are covered by a retirement plan at work and your income exceeds certain level. Your deduction is allowed in full if you aren’t covered by a retirement plan at work.
- Tax credits. Tax credits are dollar-for-dollar reductions of the taxes you owe. There are a number of tax credits that qualify as overlooked tax deductions. For example, the earned income tax credit (EITC) is one that 25 percent of eligible taxpayers do not claim—either because they aren’t aware that they qualify, or they find the rules too complicated. Used to supplement wages for low-to-moderate income workers, in 2016, this refundable tax credit ranged from $506 to $6,269. Another commonly overlooked tax credit is the child and dependent care tax credit, which can apply if you are paying someone to take care of your children while you work.
- Job-hunting costs. Among the most commonly overlooked tax deductions, job hunting costs can apply for already-employed workers. This can include fees for resume preparation, paying for job placement agencies, transportation, food and lodging and more. To be eligible, these costs have to be itemized, and the total expenses can only be deducted if they are higher than 2 percent of your adjusted gross income.
- Student loans. If you are parents of a child in college and you do not claim your child as a dependent, then you he or she can qualify for up to a $2,500 deduction on the interest that you paid on your child’s student loans. Qualifiers to obtain the credit include an adjusted gross income of less than $160,000 for married couples filing jointly.
- Energy-efficient home improvements. These are available under the Nonbusiness Energy Property Credit, and many of them are relatively easy to do. This credit requires you to pay attention to specific spending limits on items like energy-efficient windows, for example, but if you qualify, you can get a dollar-for-dollar reduction of your tax bill.
Being aware of these overlooked tax deductions can help you reclaim some of the money you are entitled to come tax season—which is money that you can ultimately set aside to save for retirement. For more retirement insight, continue to follow Ty J. Young Inc.’s Retirement You Earned blog, or call us today at 877-912-1919!