Tax Deductions People Often Miss

If you plan on doing your taxes this year, tax a few minutes to read over the types of deductions you can make for your tax return. Even small deductions may add up to a better refund this year.

Here are some common tax deductions that people often forget to use when doing their own tax returns:

Educator Expenses

Teachers often spend a good amount of their own money each year on expenses for their classrooms. This is even true for educators in higher education. If you are an educator and have receipts of the amount you spend on preparing your classroom or for the education of your students, you can use this as a deduction on your taxes, up to $250.

In order to do so, you will need to file a 1040, instead of a 1040A. The deduction will be placed on Line 23, where it states “Archer MSA deductions.” You will enter “E” on this line if claiming educator expenses.

Higher Education Deductions

If you are currently in school and paying a portion of your own tuition, you can claim part of this as a deduction. Of course, there are limitations on who can make deductions, phasing out at those with an income of $76,000 or more for filing separately, but this often isn’t the case for most individuals in school.

In 2007, you can deduct between $2,000 and $2,000 of qualifying tuition expenses. These deductions are above the line, meaning they will reduce your adjusted gross income. In order to qualify you must have attended school during the qualifying school year and paid tuition during that year as well. You may also have to prove that you are studying as part of a degree program.

Many financial advisors will suggest that individuals interested in a tuition tax deduction, should first look into the Hope Credit or the Lifetime Learning Credit before applying for the basic tuition credit. These two credits will have a stricter income limit, but will reduce your taxes a great deal more.

Non-cash Contributions

Do you often take clothes or household items to Goodwill or another charity? Many people simply drop the items off without thinking to ask for a receipt, but any charitable organization will give you a receipt so that you can use this as a deduction later in the year. It may also be helpful to keep the receipt from when you actually purchased the item, especially if there is a small chance you may be audited this year. This will show the value of the items you donated and will allow you to deduct them properly.

Home Refinancing Points

When gathering your home mortgage interest and property taxes to deduct from your tax return, you should also gather your refinancing points if you have refinanced your house this past year. Many individuals know that they can deduct points from the purchase of a new home, but many do not realized that you can do the same for a refinance.

These points should be listed on your year-end mortgage statement and can also be deducted on your itemized deduction tax worksheet. The same holds true for old points that are unamoritized from an old refinancing in a year when you have a new refinancing.