Tax season is in full swing, and you may have already received some of your tax documents.
If you’re getting ready to file your taxes, you won’t want to overlook some of these frequently overlooked tax deductions and credits.
According to the Internal Revenue Service, deductions can decrease the number of your earnings before calculating the tax you owe. You may also be subject to tax credits, which can lower your tax bill or raise your tax refund.
Tax deductions
1. Sales Tax
You can choose to offset state and local general sales taxes instead of income taxes. According to the IRS, you can do this in most circumstances if the tax rate in 2021 is the same as the overall sales tax rate.
2. Medical and dental costs
According to the IRS, you can deduct medical or dental expenditures paid for yourself, your spouse, and your children if the total amount of your medical expenses exceeds 7.5 percent of your adjusted gross income.
“Medical care expenses include payments for disease diagnosis, cure, mitigation, treatment, or prevention, as well as therapies impacting any structure or function of the body.”
3. Expenses for teachers
If you are a teacher, you can deduct up to $250 in non – deductible expenses for classroom materials such as books, supplies, computers, or other equipment.
4. Donations to charities
According to the IRS, money or property given to certain organizations — religious organizations, the authorities for public purposes, charitable schools and hospitals, war veterans’ clubs, and several more organizations – can be deductible as charitable gifts.
In general, you can deduct the market rate of your donation, but in most situations, it cannot exceed 60% of your adjusted gross income.
5. Working at home
You may be eligible to deduct certain expenses if you are self-employed or work from home with a partner. According to the IRS, you may be eligible for this deduction if you routinely and solely use your house as your primary place of business or to meet with patients, clients, or customers.
You may also be eligible if you use a portion of your house for inventory or product samples, rental purposes, or as a daycare facility. It is also possible to qualify by using a separate structure that is not attached to your home.
According to the IRS, the portion of your house used for business cannot be used for personal purposes.
6. Work-related driving
In terms of jobs, have you been commuting to work this year? That might be a tax deduction.
According to Wate, IRS says that if you use your car for both business and personal activities, you can deduct the expense of utilizing it for business. This can be accomplished by using either the normal mileage rate approach or the actual expense method. You are also obligated by law to prove your expenses with records or adequate evidence to support your claim.
Tax credits
1. Child Tax Credit
The second part of the child tax credit payments may be one of the more well-known tax credits this year. The federal government has relaunched a redesigned website to assist you in determining whether you are eligible for the credit.
2. Electric vehicle driving
Have you driven an electric vehicle to work (or anyplace else)? If your car fits certain criteria, you may be eligible for a tax credit.
The IRS says in Section 30D(a) that you can obtain the Plug-In Electric Drive Vehicle Credit if you bought a car or truck with at least four wheels, weighs less than 14,000 pounds, and uses energy from a battery with at least four-kilowatt hours that can be recharged from an external source.
According to the IRS, you must have purchased the vehicle in or after 2010 and begun driving it in the year you are claiming the credit. When a manufacturer sells 200,000 qualifying vehicles, the credit for that manufacturer begins to fade out.
3. Home energy-saving improvements
You may be eligible for a tax credit if you have certain energy-efficient features in your house. Solar electric and water heating; small wind energy; geothermal heat pumps; biomass fuel; and fuel cell property costs are all eligible for Form 5695, which is intended for noncommercial and residential energy efficient property credit.
4. Adoption
Qualified adoption expenses may entitle you to a tax credit and income exclusion for employer-provided adoption assistance.
Expenses include appropriate and prudent adoption fees, court costs and attorney fees, travel expenses, and other expenses directly associated to adopt an eligible child, according to the IRS.
The tax filing season for this year began on January 24, and tax day has been extended to April 18. It’s better to be informed on what you are qualified for to get the benefits you should receive as a citizen.
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