Top Overlooked Tax Deductions
Many tax-saving opportunities are standing at your door, and you just need to look for those opportunities. However, some Americans don’t know that some tax breaks exist, which can help in saving money. You should learn about those overlooked tax deductions soon before the amendment return deadline passes. Itemized tax deductions have given great opportunities to wage earners to pocket income, rather than handing their hard-earned money to tax departments. For those looking to save in tax deductions, this article discusses some of the overlooked tax deductions. These three tax deductions are very important and can be helpful if you want to save money on taxes.
1. State Sales Taxes
This tax deduction mainly focuses on those people who reside in states where income tax is not imposed. We are talking about Florida, South Dakota, Alaska, Nevada, Washington, Texas, New Hampshire, Tennessee, and Wyoming. We have categorized all states into two divisions- Income-taxing states and the Income Tax-free States. For the citizens who reside in income taxing states, local and state income tax deduction is a better offer to take.
But for those who live in Income Tax-Free states, you can claim sales tax reduction in two ways. Both ways can only be followed only on your tax return.
- There are IRS tables provided by states that show and determine how much and what you can deduct. If you purchase a boat, airplane, vehicle, house, or major house renovations, you can add the sales tax, which was imposed in these items to the amount listed in IRS tables for your state.
- You can use all the tax that you paid throughout the year. But for that, you need to keep track of all the sales tax you paid.
2. Reinvested Dividends
If you think that this is a tax reduction, then that is incorrect. This is just a subtraction that can save you a lot of money, which most of taxpayers miss. If you have opted to invest mutual funds dividends in additional shares automatically, make a point that each reinvestment multiplies or increases your tax basis in the mutual fund or stock. This increases the tax-saving loss or shrinks the value of taxable capital gain when you sell your shares.
There are some tools available in the market that can figure your taxes and ensure that you receive every penny for your reinvested dividends.
3. Child and Dependent Care Tax Credit
Any amount of tax credit can always help. Tax credits are generally better than overlooked tax deductions. However, tax deductions reduce the income amounts that are subjected to tax, and it is easy to overlook the credit of child and dependent care if you pay the bills of your child care via reimbursement account at work. You can save up to $5,000 of your child care bills if you have a tax-favored reimbursement account at work.
