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Frequently Overlooked Income Tax Deductions

Income tax deductions can make a huge difference in your income tax obligations. However, many deductions can easily be missed if you don't plan ahead and look out for your own tax interests long before tax season. Too often, people turn to the standard deduction when in fact, they have many expenses that are valid deductions that should be itemized and can save them hundreds or more in tax dollars.

In order to take the vast majority of income tax deductions, it is necessary to itemize your tax return. Calculated into the standard deduction for both single and married people as well as any dependants is a sum of money that is not taxed. This so called "standard" deduction is the average amount most people spend toward things that could be considered deductions. When expenses that fall into areas of deductions exceed the average, then it is wise to itemize and gain the tax break.

It should be noted that in many cases, deductions are only for the amount that exceed two percent of income. To be certain that you know exactly what valid deductions in your particular situation are, it is wise to consult a tax professional or use the best tax preparation software available.

State and local property tax, state sales tax and state income tax are valid deductions. Few people, however, pay enough in these categories to justify itemizing deductions, yet, combined with the other deductions; they may find it beneficial to use the longer form and process of itemization.

Mortgage and investment interest are also deductible expenses. Charitable contributions, provided you have proper proof for the contribution, are also deductions. Casualty and theft losses that exceed ten percent of the gross income count as deduction and may help in the case of a significant loss such as uninsured property that is destroyed in a storm or a business being impacted by a major theft.

Medical expenses that exceed seven and one-half percent of gross income are valid deductions. If you have a home business, there are strategies you can employ to deduct 100% of your medical expenses with out regard to the seven and one-half percent limitation. In situations where catastrophic medical needs impact a family, this deduction can make a very big difference, provided the expenses were not reimbursed by insurance of any kind. Of course, any expenses that are reimbursed are not considered deductible.

A few tax saving deductions will not require that you fill out the long 1040 form to fully itemize, making it even easier to save on your tax burden.

The deductions that can be claimed regardless of whether you itemize or use the standard deduction may surprise you. These deductions are known as "above the line" deductions because they do not require itemization of all expenses to claim these income tax reductions. For example, did you know that the first $2,500 of interest paid to student loans is deductible? It is! Did you know that the first $4,000 of tuition and fees for certain expenses associated with higher education is deductible? If you had to move because of your job and the expenses were not reimbursed to you or paid by your employer, that amount is another deduction frequently missed. There is also a new deduction for travel expenses incurred by military reservists that have to travel for more than 100 miles and remain away from home overnight.

If you are self-employed, there are above the line deductions that you need to be aware of as well. All of the cost of your health insurance premiums obtained through your self-employment for both yourself and your family is counted as an income tax deduction. Half of the social security and Medicare taxes you paid in are also deductible as are your contributions to retirement plans.

Among the itemized deductions frequently missed by taxpayers are union fees, non-commuting travel expenses and the cost of continued education required by your job status such as recertification courses. You can even take the cost of safety deposit boxes, tax preparation expenses and some legal fees such as deductions that many people completely forget about. Of course, the standard itemized deductions that almost every one knows about include medical expenses if over certain limits, state and local taxes, charitable contribution and common business expenses such as uniforms.

If you own a business, you can use Schedule C to include deductions that might otherwise not be considered. The cost of advertising and promoting your business and carrying business liability insurance are deductible expenses. The cost of having an office in your home is a deductible expense as well. Certain legal and professional service fees can be an income tax deduction. Benefits and wages paid to employees including contributions to their retirement plans can represent a huge deduction for the business owner.

In order to ensure that you don't miss some large deductions that could save you a great deal of money, it is wise to consult with an income tax professional so that you don't miss any of these commonly missed tax deductions. Take the time to become better acquainted with tax professionals who can teach you how to maximize your tax deductions and learn about income taxes along the way.

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