There are 10 rarely-known tax deductions that all Americans should know about when filing their taxes this year — and it could save you thousands of dollars.
Starting January 24th, taxpayers can officially start paying tax refundand the W-2 form is the main document you will need.
Employees are often given copies of these forms by January 31, by mail or electronically.
Here are 10 tax deductions Americans should know about when filing their taxes this year:
TEACHER CLASS COST K-12
Many teachers around the country use their own money to help pay for educational supplies for their students.
What some people don’t know is that the IRS allows teachers to deduct up to $250 per year for such expenses.
RELATED IRS TAX REFUND STORY
Postgraduate Education Cost
Many taxpayers assume that some expenses will no longer qualify for a tax deduction when they graduate from college.
However, the IRS grants a lifelong learning credit up to 20 percent of your education costs annually, with a maximum credit of $2,000 annually.
The credit is phased out based on your modified adjusted gross income (MAGI) – $59,000 to $69,000 for singles and $118,000 to $138,000 for joint applicants.
Employer Social Security tax for self-employed workers
One of the downsides of self-employment is paying both the owner and the employee’s share Social Security Tax.
Each half is 7.65 percent, as self-employed workers must contribute the full 15.3 percent.
However, you are allowed to deduct the employer’s share of Social Security tax of 7.65 percent.
Earned Income Tax Credit (EITC)
The Income Tax Credit provides a tax credit to taxpayers at eligible income levels and generally to dependents.
However, according to the IRS, about 20% of those who qualify for the annual credit still don’t claim it.
The credit can be as large as $6,728 — a benefit most taxpayers should investigate.
Out-of-pocket expenses for charities
Many taxpayers know they can deduct the value of goods or cash they contribute to charities.
However, some contributors are unaware of the deductible expenses that may be registered. For example, if you buy ingredients to make cookies or cakes for charity baking, the IRS allows you to deduct the cost of those ingredients as a charitable donation.
Bad debts that you cannot collect
Just like a business, if you have a bad debt expense, you can write it off as a deduction.
In the case of an individual taxpayer, this means that if you lend money to a friend and they don’t pay you back – you can write off the amount owed on your taxes.
Taxpayers only have to fully demonstrate to the IRS that the debt is indeed uncollectible.
Homeowners can deduct certain home-related expenses, such as mortgage interest and property taxes/
You can also deduct any points you pay to get or refinance a mortgage.
Mortgage points are cash advance payments that you make to reduce the interest rate you’ll pay on your mortgage.
Since points are essentially interest upfront, they are deducted in the same way as regular mortgage interest.
Contributions to IRA accounts and 401K plans are among the most common deductions available to taxpayers.
However, taxpayers should know that a health savings account, or HSA, qualifies as a tax-advantaged program, meaning that contributions are tax-deductible.
When combined with the tax deferral on income in the HSA and the tax-free withdrawals allowed on qualified distributions, the HSA will be on the radar of more American taxpayers.
Many Americans don’t know that they can choose to take a sales tax deduction.
In this case, withholding your paid sales tax may still entitle you to a tax deduction, as long as your itemized deductions exceed your standard deduction.
Child care expenses
Parents can reduce the cost of hiring a babysitter if you’re looking for work, actually working, or if you’re a full-time student.
Taxpayers will need to provide a fair amount of documentation about who you’re hiring to babysit, and you’re not simply trying to write off the babysitter on a daily basis to get a tax deduction.
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https://www.the-sun.com/money/4503518/ten-rarely-known-tax-deductions-returns/ Ten Rarely Known Tax Deductions All Americans Should Know That Could Save You Thousands on Your 2021 Tax Return