The Top 10 Tax Write-Offs They Don’t Want You To Know About…

As you may already have encountered, every tax return is different. Each year you may ask yourself what you can claim on your taxes when it comes to tax deductions or breaks. The good news is that there is a long list of tax deductions that can reduce your taxable income. Overlooking these tax deductions are wasted opportunities to save money. This is why you should take every single deduction to which you’re entitled. Using tax avoidance strategies isn’t exclusively for rich. Plenty of deductions and tax credits are available for middle-income and low-income taxpayers.

Here are our top 10 tax write-offs they don’t want you to know about, so be sure to take advantage of them. These will help you lower your tax bill.

1. Education Credit

The American opportunity tax credit, also known as AOTC, is an educational tax benefit that replaces and expands on the Hope credit and can be claimed through the tax year 2017. This credit applies to the first four years of college educational expenses and provides a tax break for expenses including books, other supplies, and tuition. The credit is worth up to $2,500 per eligible student, and its most striking feature is the fact that up to $1,000 of the credit is refundable if you do not owe any taxes. Specifically, if your tax bill is $750 but you earn $1,000 in refundable tax credits, you are entitled to a refund of $250.

K-12 educators can deduct up to $250 of unreimbursed expenses for computer equipment, books, and supplies. To qualify, you must work at minimum 900 hours in a school year. Deductions can go up to $500 for married couples filing jointly if both parties are educators who suffered expenses.

To claim the full amount of the credit, you must have a modified adjusted gross income (MAGI) of $80,000 or less, or $160,000 or less if you’re married and file jointly. The allowable amount of the credit falls as your MAGI rises. Once you go over $90,000, or $180,000 if you’re married and filing jointly, or if another person can claim an exception for you as a dependent, you are no longer entitled to the credit.

If your children are grown up and in college, don’t forget to deduct the interest you have paid on their student loans throughout the year, where appropriate. Otherwise, if you are still paying your own student loan debt, you can deduct the interest you’ve paid for the year using tax form 1098-E. You can receive this form directly from your lender.

Regardless of whether you take the standard deduction or itemize, you can deduct up to $4,000 in qualifying higher education tuition and fees you paid for yourself, your spouse, or a dependent in 2016. It’s important to emphasize that if you are married but filing separately, or if another person can claim an exception for you as a dependent, you don’t qualify for this deduction.

Lastly, make sure you are qualified before claiming the credit. Make sure you keep copies of all the documents you used to find out if you qualify and determine the amount of your credit. If the IRS audits your return and finds your AOTC claim is incorrect and you don’t have the documents to show you are qualified, you must pay back the amount of the AOTC you received in error with interest. The IRS may also charge you an accuracy or a fraud penalty. Or, you could be banned from claiming the AOTC for two to ten years. So do your homework, literally, before filing these taxes.

2. Savers Tax Credit

The saver’s tax credit, officially known as the retirement savings contributions credit, was designed to assist lower-income families contributing to retirement plans. If you qualify, this credit fundamentally pays you to put money in your retirement account. Joint filers with income under $55,000 ($27,500 for singles) can claim a credit of up to $2,000 ($1,000 for singles) for contributions to qualified retirement policies. You can write off the first $2,000 of contributions you make to a qualified retirement policy, and an extensive range of retirement accounts will qualify, from a 401k to a traditional or Roth IRA.

Whether you can claim the credit is contingent on your income and filing status. To qualify, you must not be claimed as a dependent on someone else’s tax return nor be a full-time student. You must also be at least 18 years of age or older.

The adjusted gross income (AGI) limits for claiming the saver’s credit are as follows:

• Filing as a single entity: $30,750 back in 2016. Now $31,000 in 2017
• Filing as the head of a household: $46,125 back in 2016. Now $46,500 in 2017
• Filing jointly and married: $61,500 back in 2016. Now $62,000 in 2017

The amount of your credit will be 10, 20 or even 50 percent of your contribution. This will depend on your AGI. For example, for the tax year 2017, if you’re married and filing jointly you can claim the 50 percent credit if your AGI is below $37,001. An AGI of $37,001 to $40,000 enables you to a 20 percent credit and an AGI $40,001 to $62,000 totals you a 10 percent credit.

While IRS rules don’t allow deductions for Roth IRA contributions, you might be able to claim the amount you put in a traditional IRA, as long as you or your spouse does not have an employer-based retirement account. You can take a deduction up to the full amount of permissible contributions, which is $5,500, or $6,500 if you are 50 or over.

In addition to any pre-tax contributions you make to a 401(k), you can deduct your IRA contributions; the limit is $5,500 (if you’re over 50 it goes up to $6,500). If you are self-employed, you can deduct up to $52,000 (or 25% of compensation) in SEP contributions. Check first, as this can be a huge tax benefit.

3. Earned Income Tax Credit

The earned income tax credit was created explicitly to support low-income to moderate-income families.

Income and the number of children you have in your household decide the amount of the credit. For the tax year 2016, the income limit ranges from $14,880 if you’re single and have no children. This limit reaches $53,505 if you’re married and filing jointly with three or more children.

For 2016, the maximum amount of earned income tax credit is:

• $6,269 for three or more qualifying children
• $5,572 for two qualifying children
• $3,373 for one qualifying child
• $506 for no qualifying children

You need to qualify for the credit by having business income or income from a job. If you’re claiming a qualifying child, they must be younger than 19 unless and enrolled as a full-time student, in which case the age limit will rise to 24.

Many filers forget to include state sales and income taxes paid as deductions. If you live in a state that doesn’t enforce an income tax, adding up all the tax you’ve paid on personal and household items can truly add up in savings. Instead, if your state does have a state income tax, it’s generally a better strategy to claim that as a deduction on your tax forms for extra savings unless you made some big-ticket acquisitions such as buying a car or boat. This is a wide-reaching credit available to almost everyone, as even single taxpayers can take advantage of it.

4. Homeowner Deduction

If you’re a homeowner, your luck carries on. If you remodeled your existing home, deduct state sales tax for building materials if you’re itemizing. If you bought your house, be sure to claim the interest paid on your mortgage points. If you’ve refinanced, you have to allocate the points of interest over the life of the new mortgage, as well. However, there’s a limit to this loophole. The IRS only permits mortgage deductions of up to $1 million in loans to buy or repair a home.

When buying a home you can’t write off your entire monthly payment, but with a qualifying mortgage, you can deduct the interest payments you’ve made all year.

The home mortgage interest deduction allows you to deduct the interest quota of your mortgage payment, but not the principal. The deduction can be a big tax saver, but it only a good deal for those who itemize deductions. If the amount of your mortgage interest deduction exceeds your standard deduction, you’ll save more money by itemizing.

For the tax year 2016, the standard deduction amounts are:

• $6,300 for single filing status
• $6,300 for married filing separately
• $9,300 for head of household
• $12,600 for married filing jointly or qualifying widower

The IRS distributes extensive information on what a qualifying home is and who is entitled to the mortgage interest deduction. Yet, most standard home mortgage loans qualify, as long as the loan is for your primary residence and you are the homeowner.

If you do itemize, you can deduct the points or prepaid interest you paid to purchase or build your primary home. Generally, if you can deduct all the interest you paid on your mortgage, you can also deduct all of the points.

You cannot deduct appraisal fees if they went toward the purchase of a home. You can deduct them as a miscellaneous itemized deduction. If the property was donated, this can be done only if the fees totaled more than 2 percent of your AGI.

If you’ve made your home more energy efficient, there are tax deductions for that, too. You can collect a 10 percent deduction on costs up to $500, as well as 30 percent of the cost of certain main upgrades through 2016. This is known as the Residential Energy Efficient Property Credit (Section 25D). The credit covers 30 percent of the installation, including labor costs, of qualified residential alternative energy equipment, as well as:

• qualified solar electric systems
• qualified solar water heaters
• qualified fuel cell property
• qualified small wind energy property
• qualified geothermal heat pumps

Typically, home renovation costs are not deductible on your tax return. If you make improvements to your home for medical purposes, however — such as adding entrance-and-exit wheelchair ramps or lowering cabinets for better accessibility — you can deduct those renovations as medical expenses (more about these later). If the renovations are made to increase the value of your home, you can’t claim them as medical-related expenses.

5. Child Tax Credit

The child tax credit is for taxpayers with qualifying children, and they can claim this on top of the earned income credit and credit for child and dependent care expenses. The child tax credit could be worth up to $1,000 per child living in your household.

To qualify, you must claim the child as a dependent on your taxes, and the child must be a U.S. citizen and have lived with you for at least half of the year. Moreover, the child must not provide more than half of his own support.

You might qualify for this credit if your MAGI is less than the following amounts:

• $75,000 for single filing status
• $55,000 for married filing separately, head of household or widower
• $110,000 for married filing jointly

The child tax credit is nonrefundable, but if the amount of your credit tops the amount of income tax you owe, you might qualify for the supplementary child tax credit, which is refundable. You’re not eligible for the supplementary child tax credit if you already get the full amount of the standard child tax credit. If you’re divorced, only one parent can claim the credit.

If you’re a working parent and your kids spend part of the day in child care or with a babysitter, you can claim those expenses as a tax credit. If you have child care reimbursement through your place of work, you can simply overlook the additional costs you incur beyond the $5,000 or $6,000 allocated to these accounts. Don’t miss out on these significant savings; save the receipts for any after-school care and even babysitters.

6. Medical Expenses

You can deduct medical and dental expenses for you, your spouse, and your dependents after your total medical expenses surpass 10 percent of your AGI. Most taxpayers, or whether you or your spouse is 65 or older, will be able to deduct some healthcare costs and medical expenses only if they exceed 7.5 percent of your AGI. Keep in mind that the only expenses that are deductible are the ones not reimbursed by your insurance or some other way.

The IRS say “Medical care expenses include payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or payments for treatments affecting any structure or function of the body,” as this list is quite extensive, here are some examples of acceptable medical tax deductions, according to the IRS:

• Fees to doctors, dentists, surgeons, chiropractors, psychologists, psychiatrist and other medical professionals
• Medical insurance premiums beyond the share your employer pays
• Long-term care insurance premiums, though these do have limits
• Long-term care
• Inpatient alcohol and drug treatment programs
• Ambulance service
• Dentures
• Weight loss programs for a specific disease diagnosed by a physician
• Modifications to your home for medical care, such as wheelchair ramps
• Nursing supplies, such as breast pumps
• Fertility treatments, pregnancy test kits, and sterilization
• Insulin and prescription drugs
• Glasses, contacts, hearing aids, crutches, etc.
• Guide dogs for the blind or deaf
• Cosmetic surgery required as a result of a disease or accident
• Removing lead-based paint from a surface in poor repair that is within the reach of a child
• Admission and transportation to a conference concerning a chronic condition of yourself or someone in your family
• Psychiatric care
• Stop-smoking programs, excluding non-prescription drugs like nicotine gum or patches

If in doubt for any medical expenses, be sure to check the complete list of deductible medical expenses. These will be under the IRS Publication 502.

7. Charitable Donations

Charitable donations or contributions are often ignored, especially if they were in the form of countless small donations rather than a few large ones. If you’ve supported the cost of postage, donated clothes to a charity, baked cookies for fundraisers or given rides to the clients of nonprofit organizations, save your receipts for tax preparation time. If they sum up to more than $250, you can deduct the amount if you have documentation from your beloved nonprofit. If you provided car rides or did other noteworthy driving for a charity, you can claim 14 cents per mile. You can also deduct the cost of acquiring and maintaining uniforms you wear to a place you volunteer or parking in a garage if that’s required.

To give you an example, back in 2011, taxpayers with AGI between $50,000 and $100,000 deducted $2,881 in charitable contributions. The key thing is to document your gifts. There are mobile apps available to help you calculate the fair market value of goods and tracks donations on the spot. If you do a lot of volunteering, this is recommended. Remember, you can deduct out-of-pocket expenses but what you can’t do is write-off the value of your time!

8. Job Search and Moving Expenses

Career change and even job loss are not always a bad thing. If you were looking for a job last year and had to commute for interviews, you can deduct those job search costs up to 2 percent of your AGI. But only if you’re looking in your same field and this is not your first job.

The expenses you can deduct include:

• Transportation, which includes a deduction of 54 cents per mile, parking, tolls and cab fees
• Preparing, printing and mailing out your resume
• Fees related to job searches
• Employment agency fees

If you are a first-time job seeker, you can only claim your moving expenses if the new job is more than 50 miles from your old place of residence. You can claim the cost of moving your belongings to the new place and driving your vehicle there as well as parking and toll fees, providing your employer does not reimburse you and they qualify as expenses. The standard rate is 19 cents per mile. You can also deduct the cost of lodging, but not meals, for yourself and other household members. Starting a new job is always hard, so these deductions are more than welcome.

9. Military Travel Expenses

If you are a member of the National Guard or are a military soldier, part of your travel expenses for joining meetings or drills more than 100 miles from your home and overnight stays are deductible, even if you don’t itemize. You can deduct travel expenses from the income you report on your tax return. Qualifying expenses include transportation, lodging, and even meals with some exceptions. When filing taxes you can write-off all of your lodging cost and half your meal expenses, and the 2 percent AGI limit does not apply. Yummy!

10. Self-Employment

After years of extensive job loss, many Americans looked to self-employment, but this freedom came at a price. Workers not only have to buy their own health insurance, but they also have to pay a hefty self-employment tax. If this is you, make sure to deduct the cost of health insurance premiums you pay for yourself and your family. Additional 2016 tax deductions for the self-employed include contributions to a Simplified Employee Pension (SEP) IRA, which is made pre-tax, as well as the cost of business meals, ongoing education or training and business use of your home.

Business use of your home

You can deduct certain expenses for using a part of your home for business. To qualify for this deduction, you must use part of your home for one of the following:

• As the primary location for trade or business
• As the primary location for meeting with patients or clients
• As a storage facility for inventory or product samples for your business or trade
• If you have a separate, unattached structure on your property, you must use it exclusively for your business or trade.
• For rental use
• As a day care facility

Business use of your car

If you use your car for your job or business, you might be able to deduct the costs. You can either use a standard mileage rate or the actual expense method, which is what it actually costs to run the car for its business-use percentage.

Business Travel Expenses

You may be able to deduct certain unreimbursed business expenses you experience while traveling for work. Costs could include transportation, baggage fees, meals, lodging, laundry and business calls. Any expenses that are considered extravagant or over-the-top don’t qualify for the business travel expenses deduction.

From child care costs and mortgage interest to moving expenses and various types of losses, the IRS offers a lengthy list of tax write-offs that can save you thousands on your tax bill. If you feel eligible for any of the covered write-offs, be ready to claim! Don’t forget to always keep your receipts and documentation, so that when it comes time to file your federal taxes and state taxes, you’re prepared. Not only should you have what you need, you should also be sure not to miss out on the deductions you deserve. Good Luck.