- State and local income tax: Forty-three states allow residents to deduct state and local income taxes paid on necessities like a home purchase. Because there are vast differences from state to state regarding these deductions, it is a good idea to consult with a tax professional before claiming any deductions.
- Work safety equipment and apparel: If you are expected to provide your own safety equipment at work, you can itemize the cost for these items as a deduction.
- Savings bond interest: Individuals who meet IRS income guidelines are not taxed on savings bonds used to pay college tuition or those placed in a Covedell or 529 college savings plan. Also, Series EE and I bond interest gains are not taxable until the bonds are cashed in or have matured.
- Caring for children: Child care tax credits include those for adoption, providing foster care or hosting an exchange student.
- Tax preparation fees and financial planning fees: These include money spent on tax preparation books and tax prep software as well as a visit to a live tax preparer. Fees for financial planning (but NOT commissions) are also deductible. Both fall under itemized deductions.
- Non-cash contributions to charities: Most people are aware that they can deduct cash contributions to charities and non-profits. But non-cash contributions are tax deductible as well. These include mileage driven to and from charitable events, retail value of donated items, and property (with some restrictions).
- Premiums for health insurance: This is available if you spend more than 7.5% of your adjusted gross income on healthcare and related medical expenses, including prescriptions, insurance, travel, and contributions to Health Savings Accounts (HSAs). For these expenditures, you can deduct the amount over and above the 7.5%.
- Hybrid Vehicle Deductions: The government would like to encourage Americans to “go green” by offering limited tax benefits on certain models of hybrid cars.
- Education: Those continuing their education after high school should look into the Hope Credit, the Lifetime Learning Credit, Tuition and Fees Deductions, and Student Loan Interest Deductions.
- Retirement Savings: In addition to tax-free contributions to employer-sponsored 401K plans and Traditional IRAS, qualified individuals can also get a Saver’s Credit for contributing toward their own retirement.
An understanding of the deductions and credits available to you can really help – legally – minimize your tax bill come April 15th. But bear in mind that many tax deductions and credits have complicated requirements and a qualified tax professional should be consulted.
At The Pew Law Center, PLLC, we understand that if you do run into tax problems with the IRS, it can be overwhelming. Whether you owe back taxes, haven’t filed taxes for several years, or have received an audit or wage garnishment notice from the IRS, the attorneys at The Pew Law Center, PLLC can help you or your business with these and any other federal and state tax problems. Our tax attorneys in Arizona are here to help you with a free consultation.