tax accountant boston ma

Reduce Your Tax Liability With These 3 Often Overlooked Tax Deductions

As the tax year matures, it is not too late to find ways to reduce your personal or small business income tax bill. Below are three areas to pay attention to throughout the year:

1. Take more charitable deductions.

You are probably aware that you can deduct the cash or value of property you give to charitable organizations. However, you might not be taking full advantage of this benefit. For example, you can deduct:

  • Out-of-pocket costs for volunteer charitable work; e.g., cost of food ingredients for those pastries you donated, or stamps you bought for event mailings
  • Childcare (babysitting, etc.) expenses you incurred while you did unpaid volunteer work

Make sure you fully document any charitable expenses, especially the unusual ones. A large number of deductions in this area could trigger an IRS audit.

2. Look out for unusual business expense deductions

A junkyard or scrapyard owner could, for example, deduct the cost of cat food to lure neighborhood cats and keep the rat population down. It is an unusual, but valid business expense.

More traditionally, self-employed business travelers can deduct those aggravating extra charges that airlines love to add to the cost of your ticket. Extra fees for baggage, online booking or ticket changes earn commercial air carriers billions each year. Don’t forget to add those charges to your deductible business expenses.

Again, for obvious reasons, save your receipts.

3. Deduct those job-hunting expenses.

little known tax deductionsAnyone who has lost a job and has gone to the excruciating effort of finding a new one knows that job-hunting can be as expensive as it is exhausting. If during your job search you were looking for a position in the same line of work as your most recent job, and if you’re willing to itemize and document those expenses, you can deduct them — even if your job hunt was not successful.

Below are some deductible expenses: (The list is by no means exhaustive)

  • transportation expenses incurred as part of the job search (cabs, auto, commercial, etc.)
  • food and lodging expenses for out-of-town job interviews
  • fees paid to an employment agency
  • printing costs for résumés, business cards, advertising and postage

The foregoing deductions do not apply to a first-time job hunt. However, any moving expenses involved in landing that first job are deductible, even if you don’t itemize deductions.

Below are three more miscellaneous deductions that not many people know about.

You can deduct:

  • the additional extra 7.5 percent you had to pay for self-employed Social Security tax
  • health insurance premiums — deductible at 100 percent of the premium cost for self-employed tax payers
  • alternative energy equipment such as solar hot water heaters, geothermal heat pumps and wind turbines — This tax credit is a whopping 30 percent write-off of the total cost (including labor) for those systems up through 2016.

Don’t miss out

There are many more deductions and credits you should know about before you send off your next tax return. Don’t wait until next April 1st to discover that you are eligible for an array of deductions and credits, but you failed to keep the records and receipts. Contact us for the tax planning, guidance and professional tax preparation that will mean more money for you and your business.

Sources:
Principal sources for this article was the irs.gov web page, Credits & Deductions at http://www.irs.gov/Credits-&-Deductions and an online information page from TurboTax entitled “9 Things You Didn’t Know Were Tax Deductions

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