If you pay taxes every year, be sure to use tax deductions, as using them appropriately can lower your tax bill and increase your tax refund amount. In this article, we’ll take a look at five legal tax deductions that you probably aren’t taking advantage of.
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1) Charitable deductions
If you make large charitable deductions in the form of a payroll deduction or check, you will likely remember them when calculating your taxes. However, did you know that you can deduct any out-of-pocket expenses you may have incurred while working for a charity?
For example, any ingredients for prepared meals for a nonprofit organization’s soup kitchen or stamps you may have purchased for a school’s fundraiser both count under charitable contributions. . However, make sure you have kept the receipts.
If your total contribution is greater than $ 250, you should obtain certification from the charity to document the support you provided. You may want to know more about how the charitable donation deductions were made.
2) Game losses
In the wake of the Covid-19 pandemic, many taxpayers have turned to online gambling sites. If you haven’t played well, you may be able to deduct the losses you incurred while playing. However, keep in mind that you can only get such deductions if you itemize them. Additionally, the amount you can deduct is limited to the total amount of gambling winnings you report as taxable income. Additionally, in addition to gambling losses at a racetrack or casino, you can also deduct the cost of non-winning lottery, bingo and raffle tickets. Make sure you keep all of your game receipts (i.e. any lost tickets).
3) Remuneration of the jury granted to your employer
If you served on a jury in the past fiscal year, you would most likely have received your full salary from your employer while you were a juror. As a result, some employers ask their employees to pay the jury remuneration they received into their company’s coffers. However, the IRS insists that you must report these jury fees as taxable income. But, if you are in this scenario, you get deduct the money you give to your employer.
4) Disability insurance premiums
A disability insurance premium is probably something you can overlook as a possible deduction. Such insurance helps you provide additional income if you become disabled and unable to work. However, the deductibility of these premiums is limited and sometimes complicated. Essentially, disability insurance that qualifies for a tax deduction is the type that will cover any business overhead costs that you might incur while you are on disability leave. Examples are the cost of utilities or rent for the duration of your disability leave.
However, if you are deducting the premium amount, keep in mind that any policy proceeds paid to you will be considered taxable income. However, the policy benefits will not be taxable if you pay the premium yourself and do not deduct the premium amount. In addition, any insurance proceeds will be taxable if your employer pays your disability insurance premiums.
5) Social security taxes paid by self-employed workers
This deduction is not available for employees. Employees cannot deduct the 7.65% of the salary amount that is siphoned off for Medicare and Social Security. However, if you are self-employed and pay the full 15.3% tax yourself, you can deduct half of the amount as a tax deduction. Keep in mind that you don’t need to itemize the amount to take advantage of this deduction.