When it comes to filing taxes, it’s understandable why you might prefer to keep things simple. Taking the standard deduction feels awfully tempting when the alternative is wading through a year’s worth of receipts. But it’s important to remember that you may be leaving quite a bit of money on the table if you do go the standard route. Before you take the standard deduction this year, check out these commonly overlooked deductions to see if you could be getting some more money back from Uncle Sam:
1. Child and Dependent Care Expenses. If in the past year your child or children under the age of 12 attended day care, before or after school care, or day camp (sleepaway camp is not eligible), then you can deduct those childcare costs. In order to qualify, both spouses must work—or the non-working spouse must either be a student or disabled—and the child must have spent more than half the year in your home, although there are exceptions for divorced or separated parents.
Similarly, if you are caring for an elderly parent or disabled relative who is your dependent, then you can deduct the cost of in-home or nursing home care.
You must fill out form 2441 to take advantage of these dependent care deductions.
2. Deductible taxes. There are actually several taxes that you pay that can be deducted on your federal return. For example, state sales taxes may be deducted from your federal return, because you may either deduct your state and local income taxes or your state and local sales taxes. If you live in a state with no income tax, then you definitely want to deduct those sales taxes. However, even if you do pay state income tax, if you made any major purchases in the last year (like a vehicle, a boat, building materials, etc), it might be better to deduct that sales tax. The IRS offers a step-by-step calculator on its website to help you determine the best course of action.
In addition to the state and local tax deduction, you can also deduct the total amount of excise tax you paid on the vehicle you purchased last year.
Finally, personal property and real estate property taxes may also be deducted from your federal income, so don’t forget to itemize all of these taxes when you file.
3. Expenses for your job search. Filers who were unemployed and looking for a job in 2011 may deduct the expenses incurred in trying to land that new position. Eligible costs include travel expenses (including lodging and food) if you had to go out of town for an interview, cab fare, employment agency costs, and printing costs for business cards and resumes, as well as postage and advertising. These costs are not deductible for those recent college grads who were looking for their first job, unfortunately.
However, moving expenses to relocate for a new job are deductible for any new hire, whether this is your first job or a mid-career move. In order to qualify, the new job must be at least 50 miles away from your former residence.
In these tough economic times, it’s worth taking the extra couple of hours necessary to itemize your deductions and maximize your return.