Get a Bigger Refund With These Often-Overlooked Tax Deductions
Everyone knows that there are only two things certain in life: death and taxes. When tax time looms its ugly head, most utter a groan and diligently file their returns. One could argue that the tax code is a confounding minefield purposely written to confuse and frustrate. The following deductions are underused (and perfectly legal) ways to ensure you keep as many of your hard earned dollars as possible. (See also: Stupid Tax Return Mistakes)
Before deducting to your heart's content, remember to document everything. Keep your receipts and other proof so you don't find yourself in a pickle if the tax man comes knocking on your door. There may be limitations on your ability to claim these deductions. Consult a certified public accountant if you have any questions, concerns, or if you are completely out of your element.
1. Gambling
Who doesn't like a little misappropriation of personal funds? When you find yourself a few too many cocktails deep and sitting at the blackjack table with your inhibitions lowered, it's easy to lose your hard earned cash. Don't worry, Mr. Tax Man feels your pain.
Whether you lingered at the roulette table for too long or have a penchant for quick pick lottery tickets, you can ask Uncle Sam to take pity on your wallet and deduct your losses. If it sounds too good to be true, that's because there is a catch. If you're going to claim gambling losses, you must report your winnings as well.
As an added twist, you can only claim losses to the extent of your winnings. So if you pay $100 on scratch offs but only recoup $50, you can only claim $50 in losses; the other $50 is the price of playing the game.
2. Student Loan Interest
Those of you who are all too familiar with the crippling debt incurred from pursuing higher education know that the interest rates on student loans can be especially unforgiving. Before you start lamenting the money that hasn't even gone toward paying your premiums, the IRS is here to help ease the pain. (See also: What Recent Grads Must Know To Repay Federal Student Loans)
Folks who are legally obligated to pay back their student loans can deduct the interest that they have paid in doing so. Even if you are lucky enough to have parents that repay your loans, you can still claim the interest paid since you are the one liable for the debt. The IRS even has a handy 10 minute quiz you can take to see if you're eligible.
3. Charitable Expenses
Most people are aware that charitable contributions to qualified organizations are deductible on your taxes, but the IRS's definition of "charitable" is somewhat of an ambiguous grey area. While you can't deduct the time you volunteer to charity, you can claim out-of-pocket expenses you incur on your philanthropic adventures. Did you bake cookies for a school fundraiser? The ingredients are tax deductible. Did you attend a swanky charity ball? You can deduct the mileage it took to get there. (See also: Surprising Charitable Tax Deductions)
There was even a woman who was able to deduct the cost of her babysitter because her work at a local charity made the sitter necessary, although this might be more trouble than it's worth since the IRS took her to court to justify the claim.
4. Gadgets and Technology
In a world where technology is king, keeping up with the latest gadgets can be mighty expensive. So it's a good thing that the government will step in to help offset some of the cost. If you use your phone or computer exclusively for business, you can claim 100% of the cost, including your monthly cell phone bill.
If you use you use your smartphone to post pictures of your lunch to Instagram, don't fret. If your tech gizmo of choice acts as both your business and personal device, you can deduct the portion used for business from your taxable income.
These tax breaks don't just include new PCs or the latest smartphone. Printers, Internet service, cable TV, and more can be deducted. Of course, you will be required to keep meticulous records if you are asked to substantiate your claims.
5. Searching for a Job
It makes sense that the IRS would want to help people find work; it's in their best interest to have you earning money so that you can pay the tax man. So it comes as no surprise that Uncle Sam is willing to give a little back when you find yourself neck deep in the dog-eat-dog world of job hunting. (See also: Tax Deductions for Job Hunters)
You can claim transportation costs such as gas, tolls, and parking; you can even write off printing expenses for resumes and business cards. But before you go too crazy, knot that the government has its share of restrictions. Your job search costs are considered miscellaneous expenses. As such you have to itemize all of your deductions, and they have to be more than 2% of your annual gross income.
Of course there are other stipulations, so make sure you do your homework.
Do you know of any law-abiding taxation loopholes? Share your financial wizardry in the comments!
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