A lot of people are unaware of the several tax deductions they can potentially receive when they file their taxes. Here are 5 of these deductions that you may have forgotten about or even knew existed:
- Job Hunting Costs-If you are looking for a position in the same line of work, then you can deduct job-hunting costs as miscellaneous expenses if you itemize. These expenses, however, have to be over 2% of your adjusted gross income to qualify for the deduction. Some deductible job-hunting costs include employment agency fees, cab fares and lodging and transportation expenses if your hunt takes you away from home overnight.
- Reinvested Dividends-although this isn’t a deduction, it is an important subtraction that can save you a bundle. If you have mutual-fund dividends that are invested in extra shares (which increase you “tax-basis” in the fund), then that, in turn, will reduce the taxable capital gain (or increase the tax-saving loss) when you redeem shares. If you forget to include the reinvested dividends in your basis, then you are subject to double taxation of the dividends- once when they are paid out and reinvested in shares, and later when they are included in the proceeds of sale.
- Charitable Deductions-While most people do include large charitable gifts they contributed during the year in their returns, it is equally important to keep track of little out-of-pocket costs incurred while doing charity work, as they can quickly add up. Also if you drove your car for charity in 2011, you can deduct 14 cents a mile plus any parking and tolls you had to pay.
- Student Loan Interest-Generally, you can only deduct mortgage or student-loan interest if you are legally required to pay the debt. But if a parent pays back a child’s student loan, then a child who is not claimed as a dependent can qualify to deduct up to $2,500 of the interest paid.
- Moving Expenses for Your First Job– If you had to move more than 50 miles away from your old home for your first job, then you qualify to deduct the cost of getting yourself and your belongings to the new location. Also, if you drove your car during the move, then you can deduct 19 cents a mile if you moved during the first half of 2011, or 23.5 cents a mile if you moved during the second half of 2011.
So make sure to take time and do some research while preparing your taxes this year. You may be pleasantly surprised to find out about different ways to reduce your tax bill.