There's no getting around the annual payment to Uncle Sam, but no one wants to pay more than they have to. Yet many do: According to the Government Accountability Office in Washington, DC, in one year alone, more than 2 million Americans overpaid on taxes by more than $400. We got the inside scoop from experts on the write-offs people often don't take advantage of.
Use the tried-and-true saving strategies of money mavens.
Save When You Spend
For your federal tax return, you can deduct all the sales tax you paid for purchases in the previous year (from clothing to a new minivan) instead of writing off how much you're paying in state and local income taxes. So add up those receipts and deduct whichever amount is higher. No receipts? Use the Sales Tax Deduction Calculator on irs.gov to estimate what someone in your locale and income bracket would have spent on sales tax. "If you have receipts for more expensive purchases, such as a car or boat, add on the tax for those," says Mark Luscombe, a principal federal tax analyst at CCH Inc., a provider of tax and business law information in Riverwoods, IL.
Don't rack up debt just to rack up write-offs! Learn how to tame your credit card debt.
Take Credit for Your Kids
Most parents know to take a $1,000 tax credit for every dependent child under 17. But many forget to write off day-care and babysitting bills. If you have kids under 13 and pay someone to watch them so you and your spouse can work or go to school, you could deduct up to $1,050 (if you have one child) or $2,100 (if you have more than one child) for those expenses. Costs for day camp count, too, but not sleepaway camp. For more details, check out the IRS's Publication 503, Child and Dependent Care Expenses.
How many kids should you have?
Own a Business? Get That Write-Off
Good news for the 9.1 million women who own businesses (that's more than a third of all small-business owners out there): If your company makes goods, develops software or constructs property in the U.S., the new domestic production activities deduction allows you to write off up to 3 percent of your taxable income. Calculating the deduction can be complicated (for instance, if you own a restaurant and serve or sell food, you don't get the deduction, but if you prepare food for wholesale purposes, you do), so read the IRS's Publication 225, Farmer's Tax Guide, for more details.
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Get Something Back for What You Give
If you donated old stuff -- clothing, furniture, outdated appliances -- to a charity, it's hard to know how much you should write off for it. But that old prom dress might be worth more than you think! Avoid shortchanging yourself by checking the pricing guide on salvationarmyusa.org to make sure you're deducting the maximum amount. You can even write off $.14 per mile for driving to and from the charity to drop off your donation, or for traveling to any charitable or volunteer event (parking and toll costs count, too).
Making a difference gives you more than just the tax write-off. Find out how to get involved now.
Add Up All Your Medical Expenses
You know those co-payments for doctor's visits and bills for birth control? They're deductible. In fact, any medical expense that wasn't reimbursed to you by your insurance company or that you did not pay for with money from your tax-free medical savings account can be deducted. According to the IRS's Publication 502, Medical and Dental Expenses, you can write off, for instance, what you paid for contact lenses, lead paint removal, visits to a shrink-even Band-Aids! (One caveat: You can only deduct medical expenses in excess of 7.5 percent of your adjusted gross income.) See how it pays to take care of yourself?
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Do you have tax tips or secrets to share?
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Reprinted with permission of Hearst Communications, Inc.