The first thing that comes to an average person’s mind when they file their tax returns is “what should I claim on my taxes”. Deductions and tax credits are an important part of your tax return savings that can be claimed. It is important to note that using either of these can ensure that you get a lower tax bill than usual.
While paying tax may be a service to society, the important thing in relation to this is not everyone is happy paying their taxes. Especially if they have gone through a rough year or an year where they have had to spend a considerable amount of money. This is a common problem that people face and the government knows it. The people running the IRS and the government are aware of the recurring what should I claim on my taxes question. Hence, they have allowed for the use of tax deductions as a means of lowering your tax bill and making sure that the amount saved as a result of tax deductions is spent in a more positive, helpful way to you, your family or your business.
What are Tax Deductions?
Before we get the answer of what should I claim on my taxes question, the important question is what a tax deduction is? This simply put can be defined as a deduction that decreases your taxable income. The total deductions that you get will be deducted off your taxable income to give you a lower, more acceptable tax bill for the year.
The use of tax credits on the other hand also comes under the ambit of what should I claim on my taxes question. Tax credits basically are similar in a way to deductions but are not the same and there are some stark differences between the two things. One of which is the fact that they can reduce your tax dill dollar by dollar unlike tax deduction decreasing your overall tax bill.
The following piece will highlight the most common and uncommon answers to the “what should I claim on my taxes” question, all of which if claimed will be able to decrease your tax bill and make sure you end up benefiting your business or y7our family or yourself and perhaps all of them if you play your cards right.
What Should I Claim on My Taxes – The Common Deductions
If you are worried that every time you file your taxes your mind pops up what should I claim on my taxes question? Or are you taunted by people around you because all the time you are obsessed with what should I claim on my taxes? If it is either of the case, the fact that will be outlined in the next sentence will give you solace.
Did you know that recently numbers published highlighted that 45 million people who filed their taxes claimed deductions on their tax returns. What did all that what should I claim on my taxes question amount to for them? A small matter of a mammoth $1.2 trillion dollars, numerically this is $1,200,000,000,000 (only). On top of that people who took the normal common deductions saved a neat amount of $747 billion.
A few common tax deductions that answer what should I claim on my taxes question are as follows.
· Charitable Donations
The first item on the long list to answer what should I claim on my taxes question is charitable donations. Most donations that you make to a charity in the form of cash can be typically claimed as an itemized deduction on your tax return. What a number of people don’t realize though is that in addition to your cash contributions, even your non cash contributions can be claimed in your tax return to decrease your overall tax bill.
So what should I claim on my taxes, any payment to charity made as charity by way of cash or credit card or even material that you have given where you get a receipt of their value back in return.
· Credit for Child Care
The second item on what should I claim on my taxes answer list is credit for child care. Child care is a common occurrence in the US with most parents busy earning a living and ensuring that the financial future of the child is secure. Hence typically the children are dropped off to child care centers where you may be eligible for tax credit. The most important thing about this though is that for you to claim child care credits you must have all the receipts of the child care bills etc. Unless you have a bill or receipt of some sort tracing your record will be difficult, not allowing you claim this.
· Home Energy Efficiency Improvements
If you are looking to make home improvements to your home, the best home improvement you can make is energy efficient ones. This is the third item on our list to answer the “what should I claim on my taxes” question. Consumers that get their homes an energy efficiency home will be able to claim around 30% of the cost they put into the improvements. Typically these improvements will include:
- Heating and Cooling Equipment
- Windows, etc.
So if you are able to make these improvements by the end of the tax year you will have a chance to claim such high tax deductions of your total tax bill.
· Tax Credits for Residential Renewable Energy Tax Credits
Another of a number of these green tax breaks that you can claim is part of the list to answer the “what should I claim on my taxes” question. This one is for homes that decrease the usage of energy in their homes by up to 50% as a result of the improvement or design and construction of the new home. They are also able to stake claim for 30% of the costs of improvement and or construction with regards to the energy consumption improvement. When you take a look at how much this will save you, you’ll know how low the tax bills go as a result of this.
· Tax Credits on Automobile
This is another one of the green claims you can make to decrease your tax bill. This one is the third time a green tax deduction/tax credit has been mentioned to answer the “what should I claim on my taxes” question which highlights the growing resolve of the US with respect to the environment.
If you go green with your car, you can enjoy a healthy tax credit and decreased tax bill. If you are able to buy an energy efficiency vehicle before the end of the tax year, you will get a healthy tax credit. The amount of tax credit that you can receive though will vary according to the vehicle you choose and its energy efficiency etc. Plug in a hybrid conversion kit in your car for example can get you a 10% tax deduction of the price of the kit on your tax bill.
· Changing Where You Work
Either you are relocating for your job or you are moving for your first job you can claim these expenses and add another item on the what should I claim on my taxes list. Despite being able to claim a number of these tests, there are some tests that you need to pass in order to validate this move. These tests that you will be judged through will be with regards to the deductions. The first test will be of distance; the second will be evidence of whether or not you actually had to and did make a move for you new job.
What Should I Claim on My Taxes – The Not So Common Deductions
There are many answers to what should I claim on my taxes question. Some of the answers to the question were provided above. The ones that were provided above were the common claims that people make for deduction in their tax bill to the IRS. Yet, that doesn’t mean that these are only deductions that you can claim on your taxes. The IRS tax code is a detailed document that is updated year after year. This means that for the common man to keep track of the deductions available and new ones added becomes difficult.
It is in the midst of all this that a number of item that should have been on what should I claim on my taxes list are overlooked. Here is a low down on some of those deductions that could have been claimed but weren’t.
· Reinvested Tax Dividends
This cannot be categorized in a black and white world as a tax deduction, but it is something that saves you a lot of money as far as your taxes are concerned and therefore warrants a place on what should I claim on my taxes list. If like a number of other investors you own mutual dividends you can if they are automatically invested in new shares claim an increase in your tax basis fund. This reduces the capital gain amount that is taxable on the selling of the shares.
· Interest on Student Loans Paid by Mom and Dad
This is an important tax deduction to claim in today’s world where financing education without a student loan is becoming increasingly difficult. This wouldn’t have been a part of what should I claim on my taxes list had it been the past. Now though parents are able to claim tax deductions and tax breaks from your total tax bills for the amount of interest that your mom and dad paid on your student loan. It is important to highlight that this can only be done for a child that has not been claimed a dependent.
· EITC or Earned Income Tax Credit
Millions of people that have a lower income fail to claim this deduction. What is interesting here is that around 25% of the tax payers who are eligible for the Earned Income Tax Credit fail to claim it. Most of them do so as a result of not being aware of the situation. This refundable tax credit is applicable to people with yearly earning that range from $503 to $6242 for the Calendar year 2015. This credit is designed to help workers of low income wage make sure they are able to make the most of their income. Also people that were once called middle class can also make use of this since they will perhaps be known as low classes because of one of the reasons mentioned below:
- Had to take a Pay Cut
- Have Lost their Job
- Worked Less than they would have
Hence it is also part of what should I claim on my taxes list if your income comes in the category mentioned above.
· Refinancing Your Mortgage Points
This is another item on the what should I claim on my taxes list which holds practical relevance and yet is often ignored. When you have bought yourself a house through a mortgage you will be able to deduct points in that regard off your tax bill. However, when you re finance the loan, you will have to deduct some points of your tax bill each year. This amount will depend largely on the amount of loan that you have to repay, the points you have left, etc.
A Whole List
Here is a detailed list of the 75 items that you can claim on your tax return to get a deduction on you tx bill. Some of which have already been discussed above.
- Auto expenses
- Software and online services
- Storage rental
- Bad debts that you cannot collect
- Safe-deposit box
- Business travel
- Cafeteria health-insurance plan (requires plan)
- Charitable deductions made for a business purpose
- Building repairs and maintenance
- Business association membership dues
- Cleaning/janitorial services
- Banking fees
- Board meetings
- Office supplies and expenses
- Consulting fees
- Accounting fees
- Continuing education for yourself to maintain licensing and improve skills
- Commissions to outside parties
- Computers and tech supplies
- Education and training for employees (new)
- Collection Expenses
- Employee wages
- Conventions and trade shows
- Entertainment for customers and clients
- Freight or shipping costs
- Newspapers and magazines
- Outside services
- Furniture or fixtures
- Gifts for customers ($25 deduction limit for each)
- Group insurance (if qualifying)
- Health insurance
- Home office
- Internet hosting and services
- Investment advice and fees
- Costs of goods sold
- Credit card convenience fees
- Workers’ compensation insurance
- Retirement plans
- Equipment repairs
- Dining during business travel
- Exhibits for publicity
- Family members’ wages
- Franchise fees (new)
- Legal fees
- Management fees
- Medical expenses (with plan)
- Mortgage interest on business property
- Payroll taxes for employees, including Social Security, Medicare taxes and unemployment taxes
- Discounts to customers
- Parking and tolls
- License fees
- Losses due to theft
- Pension plans
- Rebates on sales
- Research and development
- Prizes for contests
- Website design
- Real estate-related expenses
In the US not paying you taxes is not only seen as a violation of law but also a crime. Paying you taxes is must for any and all citizens of the US that are eligible to pay tax. There are however people who abstain from paying tax for the simple reason where one either they are unable to pay the tax as a result of their lack of income or are unable or don’t want to pay taxes since a lot of their money has been used up for a number of different reasons.
This is an important decision and one that needs to be taken with care. Since not paying you taxes make you a criminal in the eyes of the IRS and the law. However, what most people should realize in this regard is that filing you taxes is not in itself harmful for their financial position. This is because; a close look at the IRS tax code will highlight a number of different tax deductions and tax credits that you can claim. This means that while on the book you will be paying tax, in reality you will be able to claim a significant portion of it off as a result of your expenses.
This not only helps you abide by the law, it also ensures that you stay away from the hefty fines and penalties that can increase your tax bill out of your reach the next time you file.