It doesn't really matter whether you start doing your taxes in January or April 14th, it just isn't the type of activity that most people get excited about. Finding and organizing all the receipts, mileage, and other forms is difficult enough. Add in the impossible task of learning the tax code and it can be pretty overwhelming.
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If you still fill out the paper forms, you might want to consider tax-filing software this year. Many of the programs offer great assistance in finding deductions that you may not have thought about. If price is an issue, you will be happy to know that the IRS offers a list of companies that offer free filing of a Federal return (when certain requirements are met) and there are even some ways to get free state tax filing as well. But even with the best filing software, there will still be a chance of missing some deductions.
Here are ten commonly overlooked ones:
1. Job Hunting Costs
Many people are unemployed right now due to the bad economy. Not many people think that they can get tax benefits for being unemployed, but they can. If you are looking for a job in the same area of work that you had in the past, you can deduct those costs as miscellaneous itemizations. You cannot get any tax breaks, however, if you are looking for your first time job. You can deduct costs such as cab fares, employment agency fees, fees for printing resumes, fees for printing business cards, the cost of postage, and the cost of advertising. You can also deduct any food, transportation, and lodging, if you have to go out of town for a job interview or job search.
2. Contributions To Charities Paid Out Of Pocket
Whether you regularly contribute to charities throughout the year, or if it's a one time donation, the amount of money that you donate to a charity can be deducted. Out of pocket contributions mean any donated money that you contribute outside of work. Any money you spend on items for a nonprofit organization should be taken into consideration. Keep in mind that if your contribution is more than $250, you will need to get the charity to acknowledge it for it to count. Always make sure you have a copy of the receipt to keep for your records.
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3. Student Loan Interest Paid For By Parents
Normally any mortgage deductions for interest on student loans can only be deducted if parents are legally required to pay off the debt. However, if a child's parents repay the student loan, the IRS treats that money as though it was given to the child, who pays off the debt. If a child is not claimed as a dependent, they can qualify for a deduction of up to $2,500 of the student loan interest paid by the parents.
4. Premiums On Health Insurance
Depending on how old you are, you could potentially deduct any health insurance premiums that you have to pay. In order to deduct your home insurance premiums the expenses have to be more than 7.5 percent of your adjusted gross income. However, if you are self employed you can deduct 100 percent of your premiums above the line. The term "above the line" means that this expense is included in your adjusted gross income. This amount doesn't gets included with any itemized deductions.
5. Home Improvements for Energy Savings
You wouldn't think about it normally, but going green in your home can give you tax credits. If you make home improvements that result in energy savings, the cost of these improvements could be deducted. You are able to claim a tax deduction that is equal to 30 percent of the total cost of your home improvements made towards energy savings. The maximum amount of money you can claim on energy saving home improvements is $1,500. The downside to this is if you claimed that amount in 2009, you can't get the same tax deduction for 2010 if you made home improvements that year.
6. Deductions For Casualty Situations
Hopefully this will not be an issue for you, but keep it in mind. Natural disasters happen every year, and can cause severe damage to your house and other property. Whether it is a flood, fire, or severe snowstorm, you can claim any damage to get a tax break if the president has declared the area a disaster area.
7. Retirement Deductions
If you contribute money towards a retirement account, you can receive tax benefits. You may be able to receive a tax credit of 50 percent of the first $2000 that you invest. This is an incentive for people who are in the low income and moderate income brackets to invest in a retirement fund.
8. Deductions For Childcare
People often claim the cost of after school child care during the school year, but they frequently overlook the child day care costs during the summer months. Your child may spend more time in child day care during the summer months than they do during the school year. Whether it is a daycare provided by your work, privately paid day care, or a summer camp, you are able to get tax deductions for all of them.
9. Travel Expenses For Military Reservists
People who are a part of the military reserve or the National Guard could receive a deduction for their travel expenses that they pay to get to meetings and to drills. In order to get this deduction the person must travel a distance of 100 miles or more from home and stay one night away from home. If the person qualifies, the cost of food and lodging can be deducted, as well as 50 percent for every mile that they drive their own car to travel to and from drills. Interstate tolls and parking fees can also be deducted.
10. Mortgage Refinancing Costs
If you own your own home and you refinance your mortgage, you can deduct the points over the lifetime of the loan. If you have a 30 year mortgage, you are able to deduct one-thirtieth of the points every year.
These are just a few of the overlooked tax deductions that occur every tax season. Make sure you keep your receipts and keep detailed accounts of everything, no matter if you think it could go towards a deduction or not. It's always better to be safe than sorry. If you use a tax professional to help you with your taxes, don't be shy about asking about these possible tax deductions. Bob Lotich runs ChristianPF.com, a personal finance blog from a Christian perspective.