Legitimate Tax Deductions That People Often Overlook

By MySpendingPlan.com Editorial Staff

If you were to pay tax on your entire income, your tax bill would be very high and you would not be left with much disposable income.  This is why the IRS (and your state/locality) has set aside certain legitimate tax deductions that people can claim to lower their tax liability.  Although it would be impossible to list all the legitimate tax deductions that you can claim in this article, we will tell you about some tax deductions that are often overlooked.  Of course, tax code changes, and you need to keep up on these changes.  Your tax professional or tax software can really help here.

Are You Taking Advantage Of These Tax Deductions?

1. Business Related Tax Deductions

• Promotions and advertising expenses:  Money that you spend on advertising and promoting your business is a legitimate tax deduction.  This includes ads in newspapers, fliers, leaflets, direct mailing campaign costs etc.  However, if you entertain people to promote your business and want to claim restaurant and food expenses as tax deductions, you may not be allowed to claim the full amounts.
• Business travel expenses:  Most expenses related to business travel can be claimed as tax deductions.  These include lodging expenses, meals (only 50% allowed as deductions), rental car costs, cab fares, shipping, tickets, etc.  Even if you are on a personal vacation, but some portion of that visit is related to your business, you can claim some travel expenses as tax deductions.  However, the expenses should be prorated.  But the cost of the tickets can be claimed in full.  Similarly, if an employee or partner is traveling with you, their travel expenses can also be claimed as tax deductions.
• Money used on family:  Some family expenses can be claimed as tax deductions.  For instance, if you hire your spouse or your children to do some legitimate business work for you, the money that you pay them can be treated as a business expense.  Similarly, if they are considered as employees of your business, you can even deduct some of their medical and health care expenses as tax deductions.
• Entertainment expenses:  50% of all your business related entertainment expenses can be claimed as tax deductions.  Entertainment expenses can include meals, tickets to the football game, tickets to the theater, etc.  However, country club charges or other social pursuits can rarely be claimed as legitimate tax deductions.

2. Non Business Tax Deductions

• Those who have moved at least 50 miles from their place of residence may be allowed to claim certain moving expenses as tax deductions if related to employment.  The cost of gas, moving charges, storage costs, and car expenses may be tax deducted.  However, money spent on meals during the move is not eligible for deduction.
• If you have been out of a job and have spent money on the employment search, you can claim those job search expenses as tax deductions.  This includes the cost of printing and sending out resumes and money spent on fuel while driving to interviews or job hunting.  However, these deductions are not available to you if you are just starting out and are searching for your first job.  They are also not available if you are changing your field and looking for a job in a new industry.
• Money donated to legitimate charities and NGOs can also be claimed as tax deductions.  Even if you donate things and not actual cash, you can deduct the fair market value of those things as deductions.
• Medical expenses not covered by insurance can also be claimed, subject to certain income limits.  This can include transportation to medical appointments or the hospital.

Whatever legitimate tax deductions you think you are eligible for, make sure you have payment receipts and documents to prove that those expenses were in fact incurred by you.  There are various types of software such as Turbo Tax, TaxCut from H&R Block, etc. that can help you in this regard.  In addition to helping you with your tax deductions, such software also makes it easy to know your IRS refund status and get the IRS refunds that are due to you quickly through electronic filing.