20 Tax Write Offs & Credits You Didn’t Know You Could Claim for 2017
Filing your taxes can feel like a daunting task. It’s easy to get lost in a sea of information about rules, loopholes, penalties, deductions—most people would prefer to just get it over with, rather than sift through all of the possible deductions and credits that they could claim. In the end, this only amounts to greater losses for the individual, money left on the table, so to speak, that could be put towards savings, retirement or major purchases like a new car or home.
Don’t let your frustration with the taxes get in the way of optimizing your tax refund. Below is a list of 20 write offs that you can claim for 2017 that will help put your money back in your pocket:
There is an option to deduct sales taxes or state income taxes off your federal income tax. This write-off is primarily for those who live in states that do not impose an income tax. Even if you paid state taxes, this tax break is good for any big purchases (a car or boat, for example). If you had a major purchase in 2017, you can add the state’s sales tax you paid to the amount on the IRS tables for your state, as long as the sales tax you paid does not exceed the state’s general sales tax rate. Use the IRS calculator to figure out the deduction. It is important to note this deduction must be itemized, and you will be required to choose between deducting state and local income taxes, or state and local sales taxes.
Medical expenses for yourself, your spouse and your dependents can be deducted if they exceed 10% of your adjusted gross income (if you or your spouse is 65+ they may be deducted should they exceed 7.5% of your AGI). Expenses can include anything from preventative care, to surgeries, medication, even the cost of travel for care. Health Insurance premiums cannot be deducted unless you are self-employed, in which case you may deduct 100% of your premium cost.
Any and all money or goods given to charitable organizations are tax deductible, as are any out-of-pocket expenses. You can deduct cash donations to IRS-approved charities for up to 50% of your adjusted gross income as long as you have written records of your donations. You can also deduct the value of any items donated to Goodwill, just be sure you get a receipt upon drop-off.
Have you heard of the lifetime learning credit? If not—educate yourself! You can receive $2,000 tax credit per year, taking off 20% of the first $10,000 you spend for education after high school. You may also be eligible to deduct up to $4,000 for tuition-related expenses for you, your spouse or a dependent, as well as up to $2,500 in interest paid on a student loan in 2017.
Anything used to benefit your business, and that is able to be documented, may be deduced from your taxable income. If you are an artist this includes your paint supplies, admission to museums and galleries for networking and inspiration purposes. If you are a consultant this could include any business-related books, conferences, subscriptions, applicable technologies and office supplies. This also includes no reimbursed expenses you incur while traveling for work, such as transportation, baggage fees, meals, lodging, laundry and business calls.
Job Search Expenses
If you have been laid off from a job and are searching for a new one in the same field, you can write off related expenses (agency fees, travel expenses for interviews at 54 cents/mile, fees for printing and mailing resumes, etc.) as long as these expenses exceed 2% of your adjusted gross income. It is important to note that you cannot deduct these expenses if this is your first job, or if you are seeking employment in a new line of work.
Social Security Tax (For Self- Employed Individuals Only)
Self-employed individuals pay 15.3% of their income for social security and Medicare taxes–portions ordinarily paid by both employee and employer. However, if you are self-employed you can deduct the 7.65% employer portion off your income taxes.
Moving expenses for a job
If you have moved over 50 miles for a job, you are able to deduct .23 cents per mile of the cost of getting yourself and your goods to the new location, (plus costs for parking fees / tolls) while driving your own vehicle. You can take this write-off even if you don’t itemize your deductions.
While this is actually a subtraction (vs. a deduction) you can save money by including reinvested dividends in your cost. This applies in cases where you have mutual fund dividends automatically invested in extra shares. Each reinvestment increases your “tax basis” in the fund which reduces the amount of taxable capital gain when you sell shares.
If you welcomed child in 2017, you are eligible for tax deductions and credits. Parents with certain income requirements qualify for the Earned Income Tax Credit as well as the Child Tax Credit. You may also be able to claim the Child Care Tax Credit for child care costs required for you to work, or seek employment–this credit applies for up to $6,000.
Earned Income Tax Credit (EITC)
25% of taxpayers who are eligible for the Earned Income Tax Credit fail to claim it, according to the IRS. The EITC is a refundable tax credit designed to supplement wages for low-to-moderate income workers. Middle class workers now qualify for the credit as well, in the case that they have lost a job, taken a pay cut or worked fewer hours than the prior year.
State tax paid last spring
If you owed taxes when you filed your 2016 state tax return you are able to include that amount with your state tax itemized deduction on your 2017 return, along with state income taxes withheld from your paychecks or paid via quarterly estimated payments.
Mortgage, Interest & Home Loans
If you purchased a home in 2017 you may include your mortgage interest, paid on loans of less than $1 million, in your itemized deductions. You can also deduct what you pay in property taxes, interest paid on a home equity loan, any points you paid when you bought your home, premiums paid for Private Mortgage Insurance, as well as home improvements made for medical care (wheelchair ramps, for example). In addition, you can receive a credit of 10% for energy efficiency upgrades, such as insulation, windows, doors or roof as well as a 30% credit of the cost for installing alternative energy equipment in your home (such as solar). If you refinance a mortgage, you have to deduct the points over the life of the loan. In the year the loan is paid off you can deduct all of the points not yet deducted (save in the case you refinance with the same lender). If you sold your home at a profit, you can exclude up to $250,000 of gains from your income.
Jury payments to your employer
If your employer pays your full salary while you are on jury duty, but requires your jury payments, be sure to deduct these payments from your taxable income, as that is what the IRS considers it.
If you care for an elderly parent, or other relative they may qualify as a dependent. Any dependents you claim must meet certain criteria: their income cannot exceed a specified amount and you need to have provided at least half the support for that person. See your accountant or reference the IRS website for more information on claiming additional dependents.
Tax Preparation & Legal Fees
Whether you do your own taxes or pay someone to do them, you can write off the fees on your miscellaneous tax deductions list if they exceed 2% of your AGI. Same applies for legal fees as it pertains to taxes, alimony or job specific litigation.
If you paid alimony in 2017 as part of a divorce, you can deduct the amount you paid. Child support cannot be included in your deduction. For more information on divorce accounting click here.
Interest and Dividends
Any fees you paid to a broker, bank, trustee or agent to collect taxable bond interest or dividends on shares of stock are deductible. Stocks, bonds or securities in and of themselves are not deductible.
IRS rules do not allow a federal tax deduction for Roth IRA contributions, however you may be able take a deduction up to the full amount of allowable contributions, which is $5,500 or $6,500 if you are 50 or older for a traditional IRA contribution. It is important to note the difference between a traditional IRA and a Roth IRA for tax purposes. Traditional IRAs are tax-deductible on some state and all federal tax returns during the year in which you make your contribution, while your withdrawals are taxed at the standard rate. Roth IRAs provide no tax break for contributions put in, however earnings and withdrawals are tax-free.
401k plans provide special tax allowances, when you contribute to your 401k; you are lowering the amount of your taxable income, creating a smaller impact on your take-home pay.
For more information of tax deductions for your refund, contact Stampone & Associates at 215.277.1191. New tax clients will be accepted through April.