3 Common Tax Deductions That People Often Miss

There must be times when you file your return and then you realize after a couple of weeks that you actually missed on some great opportunities for tax deductions. You are not the only one; many people skip some good chances to keep their taxes low, mainly because of lack of planning. So, roll up your sleeves and start planning now.

Noncash Contributions

If you have given cash in charity, you probably remember it to mention in your return, but you often forget to charge your noncash contributions, which may include old furniture, clothes, shoes, anything that the receiver benefits from. All these things obviously do not come for free. You must have once purchased the same and they must still have some current sale value. So, take your pen and paper, get all your donation receipts together, and start preparing a list of all the items that you donated. Once you are ready with the list, the next step is to determine their market value. But, remember, if you do not have receipts of such noncash donations, you won’t be able to qualify for tax deductions.

Using the New Points on Refinancing

Refinancing of homes is something very common and majority of home buyers do this. If you have also refinanced your home, you must utilize the new points generated by it for deductions. For example, if you refinanced the mortgage loan for a period of thirty years (360 months) on April 1, 2009, 9 out of 240 months would have passed by the end of the year 2009. So, if you paid $3600 in points, you can deduct $90 in your tax return for 2009 at the rate of 10 dollars ($3600/360 months) per month for 9 months. Likewise, you will have 12 months in 2010, which means you can have extra tax deductions of $108 (12 X 9) in 2010.

Do You Know Health Insurance Premiums Are Tax Deductible?

Not many people know that the premiums they are paying as part of their health insurance policy are potentially deductible. You can do this by showing the money you paid for premiums in the medical expenses section. It is also important for you to keep in mind that medical expenses can give tax benefits only when the overall amount is more than 7.5% of your AGI (Adjusted Gross Income). In particular, the self-employed professionals who are not having any employer-paid insurance plan can get 100% of the premiums deducted by including the expenses in AGI without itemizing the individual deductions.

A careful planning ahead of time can save you from disappointments and frustrations that missing some potential opportunities for tax deductions can generate.