Income Tax Tips

Finance, Home & Family
on April 21, 2012
Itemized Personal
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Don’t pay more federal income tax than you have to. Check your returns for these five frequently missed tax deductions provided by the folks at Turbo Tax.

State sales tax. Many tax filers aren’t even aware that state sales tax can be deducted, mainly because taxpayers must choose between deducting state sales tax or state income tax, with income taxes being the better deduction in most cases. Filers in states without a state income tax (Alaska, Florida, New Hampshire, South Dakota, Texas, Tennessee, Washington and Wyoming, according to IRS.gov) should be sure to deduct state sales tax, easily calculated with an IRS table. For the state sales tax deduction, you can add sales tax paid on a boat, house or vehicle to the predetermined amount given by the IRS table.

Out-of-pocket charitable deductions. You’ve undoubtedly deducted large charitable contributions you’ve made via check or credit card, but don’t forget the smaller ones. Examples could include a list of ingredients for the cake you made at the church benefit event or the cost of stamps for mailing out invitations for your school’s fund-raiser. Also be sure to deduct the standard 14 cents per mile for automobile use if you drove your car for charity.

Student loan interest paid by a parent. If a parent pays off a child’s student loan and the son or daughter is not a dependent, the child can deduct up to $2,500 of student interest loan. In the past, the deduction was only allowed if the person paying the debt was also liable for the debt.

Refinancing points. When you buy a house, you can deduct all points paid in the year you bought it. If, however, you refinance, those points can only be deducted proportionally throughout the life of the loan. That means if you refinanced your house six years ago and paid points to obtain the mortgage, you can still take a small deduction for it.

Jury pay paid to an employer. If you had the pleasure of jury duty, you were paid. If your employer still paid you for a full day of work while you were serving on the jury, it probably required you to fork over the money you got doing jury duty. The IRS, however, will count your jury duty money as earned income even though you turned it over to your employer. If that’s the case, be sure to deduct jury pay so you don’t pay taxes on what you didn’t get to keep.

Before you send in your statement, be sure to avoid these Common Income Tax Mistakes, though!

This article was originally published as Income tax tips on DailyParent.com.