5 Commonly Overlooked Tax Breaks

5 Commonly Overlooked Tax BreaksIf you’re gearing up for tax-time, it’s a good time to take stock of some of the major credits, deductions, and other tax advantages available. But with so many intricacies in the tax code, it can be easy to overlook something – and even your tax software or accountant might not know to ask!

Don’t leave money on the table: read on to find out about the most commonly overlooked tax breaks available.

1. State and local sales tax

 We’ve covered this before, but many taxpayers don’t realize that they can choose between deducting state and local income taxes paid or sales taxes on their federal returns. It might not make a difference, but if you live in a place with a high sales tax burden you could possibly benefit.

Of course, compiling a list of all the sales taxes you paid in a year is not easy task. You’ll need to keep your receipts and add up all your sales tax expenses.

To help make it easier, the IRS offers an online calculator to help you estimate sales taxes paid. You can compare this amount to your income tax payments and see which is more advantageous for your situation.

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2. Moving expenses

 Did you move house for a new job or business last year?

If so, you might be able to deduct the cost of moving, excluding any reimbursements provided by your employer.

To qualify for the deduction, you need to:

  • Have moved in a time period closely relating to the start of work
  • Have moved to a workplace at least 50 miles from your old home than your old job was
  • Have worked full-time for at least 39 weeks in the first year after the move. For self-employed, you also have to work full-time for at least 78 weeks during the first two years following the move.

Members of the Armed Forces who move due to a military order and permanent change of station are exempted from these requirements.

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3. Daycare and camp for your kids

 Did you know you can take a tax credit for childcare and summer camp expenses? The Child and Dependent Care Credit is a year-round benefit that can really help reduce the high cost of caring for your kids.

A few little-known facts about the credit:

  • Summer day camp can qualify for the credit – just make sure it’s a day camp and not an overnight stay, which isn’t covered.
  • You can also use the credit for in-home sitters, licensed independent care centers, and even the cost of a cook, housekeeper, maid, or cleaning person who provides care.
  • While the credit is targeted towards working parents, you may also qualify if you were a student or unemployed for part of the year.

In order to get the credit, your qualifying dependent child has to be under 13 (or any age if disabled). The tax credit covers 35% of your qualifying expenses, up to $3,000 for one child or $6,000 for two or more, depending on your income.

Other requirements you need in order to qualify:

  • You (and your spouse, if you’re married filing jointly) must have earned income during the year
  • You must be the custodial parent or main caretaker
  • The credit must have been used so you can work or look for a job
  • You must use the single, head of household, qualifying widow(er) with dependent child, or married filing jointly tax status
  • You can’t use the credit to reimburse your spouse.

If you are in one of any number of other potentially qualifying situations – such as caring for a disabled adult or cases of divorce or separation – you may still qualify. Consider speaking to an accountant or financial advisor to learn more.

4. Weddings

Wedding planning doesn’t usually involve tax strategy, but maybe it should: you can take a surprising number of deductions!

Here are some of the most common possibilities:

Common Wedding Expenses That Could Qualify for a Tax Deduction
Church and venue fees If your wedding venue qualifies as a non-profit organization or church, you may be able to deduct your venue fee as a charitable contribution. Better yet, ask if you can waive the ceremony fee in exchange for a larger donation – you’ll save more on taxes and enjoy the warm glow of donating to a good cause.
Wedding decorations and flowers After the wedding, you may be wondering what to do with all the décor – and all those beautiful flower arrangements. Donate them! Not only will you give someone else the chance to enjoy them, you’ll be able to write off the full market value of the items.
Leftover food All that work putting together a menu, and chances are you still have a lot left over. Instead of trashing it, consider donating the food to charity – just be sure to plan ahead with your caterer and the recipient so that the donation isn’t refused.
Wedding attire If you don’t want to keep your wedding dress in the back of a closet, consider joining forces with the entire wedding party to donate unwanted attire to a worthy cause. There are a number of wonderful organizations that accept lightly used wedding clothes and accessories for those in need.

For any donation, be sure to save your receipts and keep a record of what you gave. This will not only make it easier come tax-time, but it will protect you in the event of an audit.

5. Home improvements and mortgage fees

You probably know about the mortgage interest tax credit, but there are a number of other great tax benefits to home ownership. For example, did you know that you can deduct fees for late payments, too?

That’s just one example of how the tax code truly benefits those who own their own homes.

Free Download Your Home is a tax Haven

Learn More

You know that your home can be a powerful part of building wealth, but are you taking full advantage?

Download our free guide to the tax benefits of home ownership.

Get ready for this tax filing – and plan ahead for next time

Tax season is seldom anyone’s favorite time of year, but by taking full advantage of your tax credits, deductions, or other benefits, you may find that it’s a whole lot more pleasant. And with a little knowledge and foresight, it’ll only get easier to plan ahead and save the right records. Get started today!

Let Us Help!

We can discuss this topic and more at a complimentary appointment. As a bay area retirement financial advisor, we can give you a review and make suggestions based on your retirement objectives.

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Important disclosures

The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by NPC.

To determine which investments may be appropriate for you, consult with your financial professional. Please remember that investment decisions should be based on an individual’s goals, time horizon, and tolerance for risk.

Neither diversification nor asset allocation can ensure a profit or prevention of loss in times of declining values. NPC does not render tax advice.

Information for this article was compiled from the following resources:
https://www.irs.gov/taxtopics/tc455.html
https://www.irs.gov/taxtopics/tc455.html
https://www.irs.gov/uac/summer-day-camp-expenses-may-qualify-for-a-tax-credit
https://turbotax.intuit.com/tax-tools/tax-tips/Family/Deducting-Summer-Camps-and-Daycare-with-the-Child-Tax-Credit/INF22238.html
6 Tax Write-Offs for Your Wedding
https://smartasset.com/taxes/get-a-tax-break-for-these-4-wedding-expenses

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