It’s the most wonderful time of the year—tax time. It may only be one day out of the year, but it seems like we spend the other 364 days preparing for it. Whether you take the time to file your taxes yourself or pay a professional to have them done; it’s important to know your responsibilities and how your decisions influence your money. As the tax deadline approaches, you should be asking yourself, “What can I claim when it comes to tax breaks?” There is no standard answer because every tax return is different. However, we will explore some tax deductions you may never have known about that can reduce your taxable income dramatically.
Tax Deductions You May Qualify For
- Work Expenses
It is important to first discuss the 2% rule when talking about work expenses. Turbo Tax reminds us that to deduct workplace expenses, your total itemized deductions must exceed the standard deduction. You must meet “the 2% floor.” That is to say, the total of the expenses you deduct must be greater than 2% of your adjusted gross income, and you can deduct only expenses over that amount. With that in mind, you can deduct:
- Work expenses from your tax return under certain circumstances. For example, if your place of work requires you to wear a uniform or specific clothing daily, then you may be eligible for tax deductions. Furthermore, if you need to dry clean your work clothes or uniform you might also be able to claim a tax break.
- The cost of your auto or travel expense for work related events, including the cost of a passport (for work purposes). This doesn’t include commuting to work daily, because that’s considered a personal expense.
- Expenses for a home office if it’s your permanent place of business. This gets tricky, so double-check to see which expenses are eligible for tax deductions.
- Volunteering Deductions
You may already know that donations are tax deductible. But, did you know that if you spend your weekends or free time volunteering these expenses are deductible too? For example:
- If you drive somewhere for charity work, you can deduct the gas you use on your car to get there. You may also deduct any type of uniform or clothing apparel you wear for volunteer work, if the attire is required. Also, save your parking receipts. Any paid parking while volunteering qualifies for tax deductions as well.
- If you are out volunteering for a known charity and your kids are at home, you may be allowed to deduct the cost of a babysitter. Seriously! It is okay to expense the cost of a babysitter as a charitable contribution on your return according to the Federal Tax Court, but you must be able to document that you were volunteering during the time the babysitter was taking care of the kiddos.
Check out this article at Bankrate.com for an even bigger list of tax deductions you may have missed. It’s important that you pay all the tax you legitimately owe, but we also want you to be able to keep as much of your hard-earned income as you can. Do your research to take every tax deduction, credit, or income adjustment you’re entitled to. That’s part of a smart financial strategy.
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