With April 15th looming, Americans look to reduce their tax expenses. They confront a complicated tax code. It is important to note these figures from the IRS:
- 1 billion – the total amount of hours individuals and businesses spend on taxes
- 5,000 – the approximate number of tax changes from 2001 until the National Taxpayers Advocate Report in 2013
- 30% of American buy tax software to help them
Cutbacks in staff at the IRS mean that people have difficulty reaching an actual person to answer their tax questions. This information illustrates what people face:
- 5 minutes – average wait time in 2004
- 30 minutes – estimated hold time for 2015
Tax Deductions and Credits Worth Considering
There are well-known ways to reduce your taxes such as the mortgage interest deduction and the child tax credit. Here are some not-so-famous deductions and credits.
- Interest on student loans – People paying off student loans can deduct the interest. This deduction can really help people with substantial student loan debt.
- Foster Pet Care – That phrase is not a typo. Many people are familiar with charitable deductions for cash and clothing contributions. If a person fosters a pet, he or she can deduct certain expenses such as food and medical bills.
Like any charitable contribution, a person needs to keep his or her receipts. Also, the organization needs to be a qualified charitable organization recognized by the IRS.
- Going Back to School – Many people want to finish their degree or go to graduate school. The Lifetime Learning Credit can help those taxpayers.
It is worth up to 2,000 so people who want to continue their education should investigate this credit.
- State Income Tax or State Sales Tax – Most states have an income tax, and the income taxes that residents pay throughout the year can be deducted from federal income taxes.
However, residents of states like Texas and Washington (no income tax states) can deduct sales taxes. They will have to save all of their receipts, but it pays to be diligent.
- Job Search Expenses – The last few years have been rough on Americans. Deductions exist for expenses such as resume writing services and transportation to and from job interviews.
Note: There is a very important restriction. The deductions are only available for people who are searching for a new job in the same occupation. A person who wants to make a career change from being an Administrative Assistant to a position such as Chef is out of luck.
- Kicking the Smoking Habit – People can deduct qualified medical expenses. Smoking cessation programs (prescriptions) fall under this category. When Americans quit smoking, they also save money on other taxes too.
A person must itemize to deduct for medical expenses. Another important fact is that people cannot deduct expenses that were paid using pre-tax dollars.
When managing their taxes, people need to:
- Save their receipts to back up all claims
- Consider itemizing to get the most deduction and credits
- Get assistance if they are still confused
Unfortunately, the tax code is still very complicated at this time. None of this information is intended to replace a trained tax professional; however, it can help you.