8 Little-Known Tax Write Offs

In these volatile economic times, saving is more important than ever. But all too often, people who are trying to cut expenses end up overpaying on their taxes. In fact, as many as 2 million Americans shell out more money to Uncle Sam than they really owe every year.

The good news is, there are hundreds of deductions in the tax code, and familiarizing yourself with some of the major ones could have a big impact on your bottom line. Are you overlooking tax breaks that could save you money? Read on to learn more about eight little-known write offs.

1. Job Hunter Deductions: If you’re one of the many Americans who was seeking employment in 2008, you may be able to write off some of your job search-related expenses. The cost of résumés, paper, postage, faxing, and job-related phone calls can all be deducted. What’s more, you can generally write off all travel to and from interviews, job fairs, and networking events. However, to claim these deductions, you must have searched for a position in the same field you previously worked in. If it’s your first job search, you won’t be eligible for these deductions but may be able to claim job-related relocation costs.
2. Tax Breaks for Teachers: For most teachers, the job doesn’t end when the bell rings. Many U.S. educators, particularly those who work in under-funded schools, routinely pay out of pocket for classroom supplies, such as books, pencils, and computer equipment. For this reason, the IRS allows teachers to deduct up to $250 in classroom supplies each year. The deduction can be claimed directly on your 1040 form (so you don’t have to itemize), and even if you’re not technically a teacher, you may be eligible (teacher’s aides, principals, and counselors generally qualify).
3. Home Worker Write Offs: These days, more and more people are working from home, and some of them may be eligible for a home office deduction. To qualify, you must use the space regularly and exclusively for work (as opposed to using it as a hybrid office and home gym or guest room). In addition, you must be working at home at the request of your employer. If you meet these criteria, you can simply divide the square footage of your home office from the total square footage of your home, and calculate your expenses accordingly.
4. Credits for Charity: When you give to charity, you’re not only supporting a worthy cause; you may be able to get a tax break. To qualify, you have to donate cash or property (as opposed to pledges or services), and your contribution must be made to a tax-exempt organization (to check, ask them to verify their 501(c)(3) tax-exempt status). In addition, you must itemize your deductions and should always keep detailed records. Bear in mind that contributions to political campaigns, business associations, and individuals do not generally qualify.
5. Military Travel Deductions: If you or a loved one is in the armed forces, at some point, you’ll probably be required to travel. Fortunately, certain travel expenses are tax deductible. To qualify, you must be traveling away from your permanent duty station, and your expenses must be work-related. Such expenses might include airfare, train tickets, or gas, as well as business-related meals, lodging, taxis, phone calls, laundry, and dry cleaning while you are away from home. To find out more about tax deductions for military families, visit Military.com’s Taxes Center.
6. Incentives for First-Time Home Buyers: To encourage qualified borrowers and jumpstart the housing market, the government has authorized several tax credits for first-time home buyers. If you purchased a home between April 9, 2008, and January 1, 2009, you may be eligible for a tax credit of up to $7,500. To qualify, single taxpayers must have an income that doesn’t exceed $75,000 per year, while married couples’ incomes should not exceed $150,000. However, keep in mind that the tax credit works like an interest-free loan and must be repaid over a 15-year period.
7. Breaks for Energy-Efficiency: In addition to protecting the planet, going green could earn you a tax deduction. Homeowners may be able to receive a 30% credit for making energy-efficient improvements, such as installing geothermal heat pumps, solar water heaters, solar panels, fuel cells, or small wind energy systems. What’s more, individuals who buy or lease a new hybrid gas-electric or diesel automobile may be eligible for a credit of $250 to $3,400, depending on fuel economy and weight. To qualify, include an 8910 form with your taxes, along with the manufacturer’s certification and receipts proving that you purchased an eligible vehicle.
8. Credits for Childcare: Parents who paid for the care of their child in 2008 may be able to reduce their taxes by claiming the child and dependent care credit on their return. To qualify, the care must have been provided for a dependent child under the age of 13 (in some cases, a spouse or other individual who is physically or mentally incapable of self-care may also be eligible). In addition, the care must have been provided so that the parent could go to work or look for a job. As with all deductions, be sure to keep careful records that verify your eligibility.

Once you’ve determined which deductions you may be eligible for, be sure to check the latest updates from the Internal Revenue Service. To learn more about what these deductions could mean to your bottom line, read our Tax Deductions Guide. And visit our Income Tax Center for more tips and expert advice.

In addition, remember that although you may be eligible for some breaks, there’s a limit to what you can reasonably deduct. According to experts, attempting to claim excessive deductions could earn you an audit. To protect yourself, be sure to save all your receipts, and if you do get audited, don’t panic; check out our Audit Guide for more information on the process.

Content provided by CareOne Credit Counseling