Every year, people file their taxes and have to either pay back the government or learn that the government is keeping more money than they thought they would. Either way, it makes filing taxes a stressful experience for people all over the country. There are a number of ways to lessen the burden on tax payers every year, with plenty of deductions that decrease the impact of tax time, and even some that people don’t always consider. Here is a look at some tax deductions that people shouldn’t ignore this tax season.
Child Care Credit
Those with children get an automatic deduction for their dependents. However, there are more deductions that can be claimed if a person uses or gets childcare services. If the child is under the age of 13 or is disabled, a person can qualify for up to 35 percent of all qualifying expenses up to $3,000 (a maximum of $1,050) for one child and up to $6,000 for two or more children. To qualify, the parents must have been working, be the custodial parent, child care must have been used so the parents could work and the childcare provider cannot be the other parent. Summer camps also count, but not overnight camps.
State Sales And Income Taxes
When it comes to itemizing deductions, a person can deduct either their state and local income taxes paid or the state and local taxes that were paid, but they have to choose only one. The best thing to do is bring information on both of those and choose the one with the highest deduction. Most people will find the state and local income taxes as the best bet, but in states without state and local income taxes, such as Texas, it is better to use the sales tax deduction. People who make large purchases might find sales tax the better option as well. For people who use sales tax, there is an IRS table that allows an estimated sales tax amount.
One of the key areas that the IRS hits many people is in gambling wins. Many times, a person has to pay immediately when they win a big prize, whether it is from a slot machine, card game or sports book. However, while the person has to pay a large percent of their winnings to the IRS, it also means that all their losses are also tax deductible. If a person keeps track of their gambling expenditures, it can help to offset the money they have to pay on their gambling winnings. Gambling losses are claimed as a miscellaneous deduction. This also counts on lottery winnings, with all the lottery tickets purchased counting as a deduction against the taxed winnings.
A person also needs to claim all their educational costs as deductions on their taxes. Any amount spent on education up to $2,500 per student is tax deductible. This includes not only the cost of classes, but also text books and course materials as well. Once a person is out of college and repaying school loans, there is a Student Loan Interest Deduction as well, which can be up to $2,500 per student as well. For single graduates, this is good as long as the person makes under $80,000 a year, or under $160,000 for married couples.
Medical And Dental Costs
When it comes to medical and dental expenses, a person can itemize these as well for deductions if they reach a specific level. That would be 10 percent of the adjusted gross income, or as low as 7.5 percent if a person is over the age of 65. The deduction is only for expenses above this amount. This means that a person who made $50,000 in 2015 can deduct any medical expenses that exceed 10 percent, or $5,000, in the year. This really helps people who were hospitalized or underwent an expensive procedure in a given year. It also includes travel expenses to get to the doctor.
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Shawn S. Lealos is a freelance writer who graduated from the University of Oklahoma in 2000 with a Bachelor’s Degree in Journalism. He writes for a variety of national publications and has over 15 years of sports journalism experience. Follow Shawn on Twitter @sslealos. aExaminer.com.