Lesser-Known Tax Deductions
Would you ever say no to a potential tax break? Better prepare for next tax season! Keep reading to find out some lesser-known tax deductions that you can take advantage of in 2022.
Yes, you read that right. You can either deduct sales taxes or state income tax when itemizing your deductions. This can save you hundreds, if not thousands of dollars. If you made a big purchase, like a car, it might be a better option to write off the sales tax on it. Most tax software will be able to optimize your deductions and tell you which option is best.
Okay, okay, this one isn’t exactly unknown. However, most taxpayers are not taking full advantage of writing off charitable gifts. Whenever you pay out-of-pocket for a charitable event you can write this off. Maybe you bought pizza for a fundraiser or made a cake. You can deduct the cost of the pizza and the ingredients used to make the cake. Make sure you save all of your receipts and itemize them so that you can be prepared in the case of an audit.
If you are a full-time employee or student, or looking for work and pay a babysitter to watch the kids while you are away, you can claim these expenses. In order for this deduction to go through you will have to provide the name, address, and tax ID or social security number of the person or business you enlist babysitting services from. This goes for all childcare expenses – babysitters, daycares, before and after school care, and even summer camps.
Health Insurance Premiums
The IRS is surprisingly sympathetic towards individuals whose finances have been severely impacted by large medical bills. If your out of pocket medical & dental expenses exceed 7.5% or more of your gross income then you can add that amount to your itemized deductions. The self-employed are even better off; if you pay for your own health insurance you can deduct the full amount against your self-employment income.
This is typically a deduction for college students, but you can still leverage it after graduation. The ‘Lifetime Learning’ credit takes up to 20% off the first $10,000 spent on higher learning after high school. This percentage will be adjusted depending on your current income, but nonetheless provides a good incentive for continuing to pursue education after high school and college.
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