Top 5 Overlooked Tax Deductions
Doing your taxes with an online product is a great way to conveniently and accurately file your return. But if you’ve ever worried whether or not you’ve caught every deduction, we understand the doubt it may cause. Overlooked tax deductions may mean paying a higher tax bill than is necessary.
Overlooked Deductions May Cost You
We’ve tapped our tax experts to shed light on a few of the most overlooked deductions and why they might be missed. Plus, learn how a Tax Pro Review lets you file online and have an expert check your return so that you can be confident that every overlooked deduction has been uncovered.
Property taxes – Taxpayers may miss deducting property taxes paid to a county or other local government during the year. This may happen as there is no dedicated tax form required to be sent to the homeowner to remind them. It’s up to the taxpayer to remember to deduct the amount paid as an itemized deduction.
Dependent care credit – Often if a taxpayer has a childcare flexible spending account (FSA) using pre-tax dollars, and two or more children, they may also be able to take advantage of the dependent care credit. For example, a taxpayer with two children can exclude $5,000 and potentially claim a credit based on $1,000 of additional qualifying child care expenses. But a taxpayer with one child who excludes $5,000 cannot claim a credit for any additional child care expenses.
Reinvested dividends – Taxpayers who own dividend paying accounts may have them automatically reinvested into their account to buy more shares. They pay taxes on the cash dividends for the year they are distributed, but may inadvertently pay taxes again on the same dollars when the shares are sold in the future. Taxpayers should keep careful records and an eye on their cost basis to avoid paying taxes twice.
Earned income tax credit (EITC) – This credit is intended to reduce the amount of tax owed for low- and moderate-income wage earners. However, only 4 out of 5 eligible taxpayers claims the credit according to the IRS. That may be due to complex rules and limited understanding of who is eligible.
Deductible IRA contributions – Taxpayers who contribute to a Traditional IRA may be eligible to claim some or all of their contributions as a deduction. With contribution limits up to $5,500 (or $6,500 if the account owner is age 50 or older), not claiming an IRA deduction could mean missing out on a sizeable reduction to their taxable income.
A Tax Pro Review Can Find Overlooked Deductions
The deductions listed above represent just a few examples of deductions that taxpayers may miss when they are not familiar with the ins and outs of taxes. The good news is Tax Pro Review can help you identify these and other overlooked deductions that may be available to you.
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