There are a lot of things you can't deduct on your federal income tax, like your vacation to Cancun or your new sports car. However, the Internal Revenue Service (IRS) does allow plenty of other deductions, which can result in a lower tax bill or perhaps even a larger return.
State Sales Tax
A lot of folks don't realize that if you're paying state sales tax or state income tax you can write it off of your federal income tax. It does require you to itemize the deduction rather than taking a standard deduction, but programs such as TurboTax can help you determine which is best for you. Even for those that live in an income-tax-free state, there are ways to claim the sales tax deduction. The IRS even has a Sales Tax Deduction Calculator to help you out.
Few people park their kids in front of the TV these days and consider that “child care,” and as a result babysitters or other services can cost a lot of money. Fortunately, those costs can earn you a tax credit – if the service or person is watching the kids while you're working, looking for work, or are a full-time student. In other words, you can't deduct the cost of a babysitter for an evening out, but for work/school expenses the costs can be used as a credit, which reduces your tax bill dollar for dollar. The current law allows up to $6,000 in care expenses.
Give and you shall receive — that is if you donated money or goods to a charitable organization you can qualify for a tax deduction. This can include participating in a bake sale where you can deduct the cost of the ingredients, while you can write off the out-of-pocket expense incurred during good deeds like paying for stamps for a school fundraiser. Likewise, if you drove the car for a charity event you can deduct 14 cents per mile.
Unusual Business Expenses
If you needed to buy something unique or unusual for business it can still be deducted from your business income. As an example, while someone running a lawn service can keep track of fuel costs and lawn bags and deduct those costs/items; a lifeguard could claim sunblock and someone running an oil change shop can deduct the cat litter that is used to clean up oil spills.
There are those people that consider themselves “professional students” and there are numerous deductions provided to full-time college students, regardless of age. According to the IRS, “An education credit helps with the cost of higher education by reducing the amount of tax owed on your tax return.”
Likewise, for those who continue their education, there are also options to take additional deductions. While some of the deductions phase out at higher income levels, there is no age cap on the deductions, so even seniors and retirees can benefit from hitting the books again.
Peter Suciu is a Michigan-based writer who has contributed to more than four dozen magazines, newspapers, and websites. He regularly writes about military small arms and is the author of several books on military headgear including A Gallery of Military Headdress, which is available on Amazon.com.