Money Matters - Simplified

Most Commonly Ignored Tax Deductions

While paying taxes we take advantage of some common deductions, but some lesser known exemptions are often ignored which can save a significant dollars.
Some often ignored tax deductions can save a significant amount and lower the tax liability of the users.

Our complex tax code often makes us hand over our hard earned money as taxes when in fact we were eligible for a deduction.

Though we keep in mind the more common ones like deductions for property tax and charitable donations, we ignore the related deductions, thus end up paying more than our real tax liability to the IRS.

Read on for some of the less familiar tax deductions that can save you some of your hard earned dollars.

1. Purchase of New Vehicle
The Internal Revenue Service offers tax credit on cars that are fuel efficient.

As per the Energy Policy Act of 2005, those who bought certain energy efficient vehicles between Jan. 1, 2006 through Dec. 31 2010 are eligible for tax credit.

Even the American Recovery and Reinvestment Act offered deduction on sales and excise taxes paid on the purchase of the new vehicle between Feb. 17, 2009 through Dec.31, 2009.

Apart from this, IRS offers exemption on taxes for mileage, when vehicle is used for medical purposes.

2. Sale of Home
Whereas owning a home gives you massive tax write-offs each year, you also get some tax benefits when you sell your home.

Nearly $250,000 of profit from the sale of your home is exempted from tax if you have lived in the house as their primary residence for at least two of the preceding five years.

Also, one can deduct the fees incurred to sell the house, a part of the property tax paid by you while you lived in it, commission paid by you to the real estate agent or any legal or closing fee, etc.

3. Making Energy Saving Home Improvements
All improvements made with the aim of energy conservation are eligible for a tax deduction. Installing energy efficient heating or cooling products can get you a tax credit of up to 30 percent of the cost incurred by you.

Other home improvements like replacing windows, insulating roofs or adding storm doors are also eligible for a 30 percent tax credit.

Tax credits are available till the end of 2010, and no exemptions are available on upgrades done in 2009.

4. Traveling Expenses for Charity
The expenses that you incur on traveling to the place of a charity event can be added to miscellaneous deductions.

So keep a record of the miles traveled, whether you drive a car or travel in a bus. Keep receipts of the public transport or miles run by your car and also the receipts of tolls.

5. Shipping and Baggage Costs
Sometimes you have to ship documents, displays or baggage ahead of your tour.

These shipping and baggage costs are eligible for deduction under miscellaneous head and remember to keep these receipts along with your business documents.

6. Keeping in Touch While on Business Tour
When on a business tour, one often makes calls and faxes or uses the internet to keep in touch with contacts.

Ensure to get an itemized bill from your hotel with separate record of expenses incurred on phone or internet usage.

You can also deduct a part of expenses on business meals and entertainment not refunded by your company.

7. Job Search Expenses
In addition, job search expenses are deductible if you searched for a job in the same field you were employed earlier.

Other deductions include fees paid to employment agency, expenses incurred on resume preparation, advertising, postage, long-distance phone calls, and travel.

8. Tax Credit for Working Parents
The expenses you make for childcare, including daycare or nanny services, can reduce your taxes up to $3,000 for a single child or up to $6,000 for two or more children below 13 years of age.

So the routine expenses that one incurs at home or work can be saved from taxes.

Do not forget to retain the receipts of expenses however small they may be. All these expenses either incurred for business, charity or your health, can contribute in lowering tax bill.