5 Tax Breaks You Might Be Missing Out On
This year, don’t get mad at the tax man. Instead, devise a plan to find as many tax deductions as you can. Here are five of the most commonly overlooked tax breaks. The more you know, the less you’ll pay when you file your taxes by April 18.
Breaking up is hard to do, but it can be tough on your pocket book, too — particularly if you’re responsible for making spousal support payments. The good news: Alimony is a tax write-off filers might not know about.
“Alimony payments are a hard-fought battle in many divorces, and no one wants to pay them,” said Michael Eckstein of Eckstein Tax Services in Huntington, N.Y. “But, for the person stuck paying them, they’re tax deductible.”
To qualify to deduct spousal support payments, you and your ex must be legally separated and live in separate homes. The payment must not be considered as child support or as part of a property settlement.
Driving Between Jobs
“If you drive your car between two different employers, that mileage is deductible, provided you drive from one employer location to a different employer location,” said Kenneth Reid of MasterType Accounting and Business Services in Chicago. If you work a day job at General Electric, for example, but after work head over to Target for your part-time gig, that mileage can be deductible.
“If you drive your vehicle while at work for your employer, this mileage is deductible,” added Reid. “For example, you work in an office, and you are required to drive to the office supply store to purchase office supplies, or if you are required to drive your vehicle to make deliveries to customers while on the clock.”
Still, miles spent commuting are not deductible. The standard business mileage deduction for 2015 is 57.5 cents.
Wearing a uniform to work might not be fun, but it can add a boost to your tax return when April rolls around. It’s one of the hidden tax breaks many workers don’t know about. “Many times, people are required to purchase uniforms that are only appropriate to wear at work. The cost of these uniforms and the cost of cleaning the uniforms are both deductible,” said Reid.
To deduct the cost and upkeep of work clothes, they must be worn as a condition of employment, and can’t be considered suitable for everyday wear. A button-down shirt and a tie probably won’t qualify. However, scrubs, police officer uniforms and hard hats likely will.
Tools and Supplies
“Some people are required to purchase tools in order to perform their jobs, and the cost of the tools are deductible,” said Reid. That is, so long as the cost incurred totals at least 2 percent of your adjusted gross income for the year.
Auto mechanics, construction workers and landscape architects can easily incur expenses that exceed the 2 percent threshold. So can teachers, who “often must purchase school supplies in order to do their job,” said Reid, who added that teachers do receive a small $250 deduction for the purchase of school supplies. Even so, that “deduction is often far less than what the teacher actually spends for the school supplies that are needed throughout the school year.”
There are certain tax breaks for those who work with a financial professional, so long as those investment expenses exceed 2 percent of the taxpayer’s adjusted gross income. “A typical client who uses a financial planner or investment advisor can deduct IRA custodial fees, investment advisory fees, safety deposit box fees — if the box is used to store investment-related storage — and even transportation costs to your investment advisor’s office,” said Matt Hylland, financial planner and investment advisor for Hylland Capital Management.
You can also deduct the cost of tax advice and preparation, as well as losses on traditional or Roth IRAs (upon distribution). In addition, any legal fees incurred while collecting taxable income or getting tax advice can also be deducted.