It’s hard to keep up with the ever-changing tax code but if you still need to do your taxes this year, consider these four commonly overlooked deductions:
- Out-of-pocket costs incurred while doing work for a charity: You can write off costs you incur when doing work for a charity. For example, ingredients for meals you prepare for a nonprofit organization’s fundraising dinner and post cards, printing and stamps you purchase for a school’s fund-raising mailing count as charitable contributions. Contributions that exceed $250 require an acknowledgement from the charity documenting the support you provided. Any mileage on your car for charity in 2015 allows you to deduct up to 14 cents per mile, plus parking and tolls paid.
- Student loan Interest paid by parents: If parents pay back a child’s student loans, the IRS views the transactions as if the money were a gift to the child, who then paid the debt. As long as the child is no longer claimed as a dependent by his or her parents, he or she can deduct up to $2,500 of student-loan interest paid by mom and dad each year. You do not have to itemize to take advantage of this.
- Child Care Tax Credit: Tax credits reduce your tax bill dollar for dollar. The Child and Dependent Care Credit provides for a tax credit of up to 35 percent (depending on income) of costs incurred to take care of qualifying individuals while you work. A qualifying individual includes your child under age 13. When figuring the amount of your credit, you can claim up to $3,000 of your total costs, if you have one qualifying individual. If you have two or more qualifying individuals you can claim up to $6,000 of your costs. You can qualify for a tax credit worth between 20 and 35 percent of what you pay for child care while you work.
- Social security taxes paid: If you are self-employed and have to pay the full 15.3 percent self-employment tax yourself (instead of splitting it 50-50 with an employer – each paying 7.65 percent), you can write off half of what you pay. That deduction comes on the face of Form 1040, so you do not have to itemize to take advantage of it.
If you’re a college student and have already filed your taxes, consider these top three things you should do with your tax refund.
- Still Need to Do Your Taxes? 4 Commonly Overlooked Tax Deductions - February 25, 2016
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- Top 3 Things College Students Should Do with their Tax Refunds - April 17, 2015