Hidden Tax Deductions
- Many tax deductions are adjusted annually for inflation, such as 401(k) elective deferrals, child tax credit, earned income credit, interest on student loans and personal exemption. It is important to know the current amounts for allowable deductions from an accurate reference source. IRS publications for the current tax filing year are the most accurate sources, as well as accountants and tax planning professionals along with the most current published tax code available from the IRS.
- Many taxpayers with college-age dependents, or returning to school themselves, are aware of allowable deductions for education expenses for school tuition. But there are other important education expenses that are eligible to be deducted at tax time. Add these to your list of itemized tax deductions: dues paid to professional associations and subscriptions to professional publications, expenses of job-related training and seminars.
- If your passion is helping others, and you incur expenses while doing so, you may have hidden tax deductions to report at tax time. If your volunteer work requires travel, you can deduct mileage for your commute, 14 cents per mile in 2010. Childcare expenses incurred for volunteer work are deductible. If you spend money on a charity recipient in a mentoring capacity, that is a deductible expense. Charitable donations over a certain amount are tax deductible, but must be supported by documentation. Receipts, even for cash donations, are important for tax filing purposes to ensure your deductions for charitable donations.
- If you care for aging parents by providing more than half of their financial support, you may qualify for a tax deduction. Your expenses caring for them must exceed 7.5 percent of your adjusted gross income to qualify. It may be more cost effective to support aging parents in your home than in a nursing home setting or in their own home independently.