The 2015 tax season is upon us and whether you prepare your own taxes online or hire an accountant to manage your finances, it’s always helpful to educate yourself on the newest tax laws to make sure you maximize your return. This is particularly true considering that last year, H&R Block claimed that Americans overpay taxes by $1 billion annually. Before you gather your W-2s, 1099s, K1s and other tax documentation, read on to find our 7 most surprising tax deductions this year—but be sure to consult a tax professional before using these deductions for your tax return.
7 Surprising Tax Deductions
1. Job-Related Moving Expenses
If you’ve moved at least 50 miles for a new job and have worked there at least 39 weeks, you may be able to use your moving expenses as a deduction. Your move must also have occurred within one year of the start of your new job, and you may not deduct any expenses reimbursed by your new employer.
2. Undergraduate or Graduate Education Courses
Did you take any post-secondary courses for work or start a part-time graduate degree? Even if you only took one class or aren’t enrolled in a degree program, you may be able to deduct up to $2,000 of your tuition, fees, books and supplies through the Lifetime Learning Credit. There’s no limit on how many years you can claim this deduction, making it a great benefit if you’re investing in your own education.
3. Child Care Expenses Tax Credit
When both parents are working or in school full-time, you may be able to receive a tax credit to help with child care expenses: up to $3,000 for one child or $6,000 with two or more kids (the exact amount will vary depending on your adjusted gross income). Your kids must be 12 years old or younger, and only child care costs during your work hours may be considered.
4. Green Home Improvements
The Residential Energy Efficient Property Credit can credit you 30% of the cost of newly-installed alternative energy equipment. There is no dollar limit and qualified purchases include solar-operated equipment and wind turbines. This tax credit is available through 2016, so even if you didn’t make any repairs in 2014, now is a good time to plan for some green upgrades in the next two years.
5. Parent-Paid Student Loan Interest
With 25% of Millennials saying they’ve moved back with their parents at some point, it may also not be surprising if many of those parents have helped their kids with the bills. If your parents have helped cover your student loan payments, you may actually deduct up to $2,500 of the paid interest (your parents cannot make the deduction on their taxes since it is not their debt).
6. Refinancing Points
Did you refinance your home in 2014? If so, then you can deduct your points; however, you must spread the deduction over the life of the loan, so if you refinanced to a 30-year mortgage, you may only deduct 1/30th of the points paid. Some restrictions apply; please check with your tax advisor before using this deduction.
7. Social Security Tax for the Self-Employed
If you are a freelancer or own your own business, then you are most likely paying the full share of your social security tax, rather than splitting it with your employer like most people do. In this case, you can claim half of the total amount you paid to Social Security. The required contribution is 15.3% of your income, so you’re able to count 7.65% as part of your tax deduction.
With these tips you can hopefully save yourself a bundle and face April 15th worry-free. For some interesting reading, check out some creative and unusual tax deductions around the world. As always, be sure to contact a certified tax professional with any questions you have.