Five Commonly Overlooked Tax Deductions

From Carol McAtee’s CPA firm in St. Petersburg, FL- Every year millions of taxpayers overpay their income taxes by overlooking some of the money saving deductions listed below.

1. State sales tax. If a taxpayer itemizes, they have the choice of deducting either state and local income taxes paid of local sales tax. For taxpayers residing in states with a state income tax, the income tax deduction is usually a better deal. However, taxpayers living in states that do not impose an income tax, such as Florida, can deduct state sales tax paid. The IRS has tables to calculate the deduction based on their income and state and local sales tax rates. However, if a taxpayer purchased a vehicle, boat, or other big ticket item, any sales tax paid on the purchase can be added to the IRS table amount.
2. Out-of-pocket charitable contributions. Most taxpayers remember the large gifts made during the year or donations made through payroll deduction, but the little things can add up, too. Costs incurred and mileage driven while doing work for charities is also deductable. For example, ingredients used to prepare casseroles for the local nonprofit soup kitchen or stamps purchased for a school’s fundraising mailing are also deductable.
   
3. Job-hunting costs. Taxpayers looking for a position in the same or similar line of work can deduct job search expenses. Such expenses can be deducted if a taxpayer itemizes and to the extent that the total costs exceed 2 percent of adjusted gross income. Job-hunting expenses incurred while searching for a taxpayer’s first job don’t qualify. Deductable job search costs include, but are not limited to: lodging, transportation, food (if away from home overnight), cab fares, employment agency fees, postage, advertising, resume preparation, and business cards.
   
4. The cost of moving for a first job. Although job-hunting expenses are not deductable when looking for a first job, moving expenses to get the job are. This deduction is available even if a taxpayer does not itemize. To qualify for the deduction, the job must be at least 50 miles away from your old home. Deductable costs include: moving costs, mileage driven to the new home, parking and tolls.
   
5. Deduction of Medicare premiums for the self-employed. Taxpayers who continue to be self-employed after qualifying for Medicare can deduct the premiums paid for Medicare Part B, Medicare Part D, and the cost of any supplemental Medicare (medigap) policies. The deduction is available whether or not a taxpayer itemizes and is not subject to the 7.5 percent of AGI limitation that applies to itemized medical expenses.

Hiring a tax professional can pay for itself, with just the addition of often-overlooked deductions and the avoidance of even small penalty amounts. As tax professionals, McAtee & Associates can help both individual and business taxpayers with all their tax matters.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.