Some Tax Deductions People Miss

You can save a lot of money when tax time comes by taking the time to carefully look over your financial history for the year, and itemizing all the legitimate deductions you can make. Everyone knows this. Yet, most people tend to think that looking for tax deductions is only for specialists. Thus, they miss the opportunity for big savings. The fact is, the average person has many more expenses to deduct from their income taxes than they think. Here some of the average person’s most often-missed opportunities for a tax break.

First of all, everyone knows that giving to charity lets you deduct the money from your income tax. What many don’t know, is that if you don’t have actual money to give to charity, you can give in other ways—and still qualify for a tax deduction. For example, instead of giving money to charity, you can charge payments to charitable organizations to your credit card. The money you charge will still be deducted from your income tax for that year. Then, you can then pay off the balance on your card, while still having saved money on taxes.

Moreover, if you give material goods to charitable organizations, you can deduct the combined value of those goods from your taxes. You’ll need a receipt proving that you gave the goods in question to the charitable organization, and then you can rest easy that you have helped both someone else, and yourself.

Another often-overlooked way to save money come tax time is to consider refinancing your home. The “silver lining” to the current housing crisis is that interest rates on home loans are the lowest they’ve been in a long time. If you refinance now, there’s a high chance that you will save money, given the lower interest rates. The advantage of this act for tax purposes is that any points you spend over the course of refinancing the home are tax-deductible. If you refinance now for a new loan of 20 years, and pay $3,600 in points–$15 a month - then you can write off $15 in points every month on from your income tax. Plus, if you refinance twice, you deduct from your taxes any unamortized points left over from the older refinancing.

Another source of possible tax deductions is health insurance. High insurance premiums can be draining on your finance. However, most people forget that the effect of high insurance premiums can be softened somewhat by the fact that they can be tax deductible. How? Insurance premiums are added to your list of reported medical expenses. If those expenses comprise more than 7.5% of your adjusted income, they will give you a tax break. If you’re self-employed and not covered by the employee health plans of any relatives or of a spouse, then you get to deduct all of your health insurance premiums, no matter what.

Education is another little-known source or tax deduction. Teachers get to deduct the cost of school supplies used during the course of their work, up to $250 worth. Meanwhile, students making less than $65,000 a year can deduct up to $4,000 worth of post-secondary education from their taxes.

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