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Unusual Tax Deductions and Credits You Need to Know About

Strange but Legal: Unusual Tax Deductions and Credits

When it comes to tax season, many of us dread the thought of filling out forms and meeting with accountants. However, did you know that there are some unusual tax deductions and credits that can help you save money?

These deductions and credits are legal and can provide you a bit of financial relief. Lets take a look at five unusual tax deductions and credits that you might not have known about.

Private Jet Travel

Did you know that you can deduct the cost of buying, leasing, or using a personal aircraft for business purposes? If you have a company, owning or leasing a private jet can be used as a tax deduction.

One thing to note is that if the private jet is for personal use only, you cannot claim it as a tax deduction. However, if the use is related to your business, including transporting clients or employees, the costs associated can be claimed.

New Toilet

If you are eco-friendly and looking to upgrade your home, then you might be eligible for a tax credit for purchasing an energy-efficient appliance. This includes purchasing a new toilet that uses less water.

This type of toilet can save up to 16,000 gallons of water per year, and you can claim up to $500 for the tax credit. The tax credit is available for primary residences only.

Your Instagram Pet

If you have a photogenic pet you love taking photos of and promote on Instagram, you might be in luck. If your pet is a business asset and used for advertising, you can claim the expenses related to their care as a tax deduction.

This includes grooming, food, and other expenses. However, it is essential to ensure that you keep proper records of these expenses and are used for business purposes only.

Your Pool

Do you have a pool in your backyard that is medically necessary? For instance, if you have a medical condition that requires regular swimming, the cost of installing a pool can be claimed as a medical expense.

Certain pool equipment and maintenance can also be claimed as medical expenses. However, it is important to note that only the cost of the pool installation and equipment that is medically necessary can be claimed.

Your House Plants

Believe it or not, house plants can be a business expense. If you work from home and have clients that come over, having house plants can create a friendly and welcoming environment.

The cost of plants, pots, soil, and other necessary expenses can be claimed as a business expense. It is important to ensure that these plants are used for business purposes only and you are keeping proper records of the expenses.

Regular Tax Deductions

Now let’s look at some of the more regular tax deductions that everyone can take advantage of.

W-2 and Tax Documents

Before you start to file your taxes, you will need to have certain tax documents, such as your W-2, to give to your accountant. W-2 provides your wage and tax information to the Internal Revenue Service (IRS).

Other tax documents that you should have on hand include your 1099-MISC, 1095-A, and any other income documents. Ensure that you keep these documents organized and in a secure place.

Regular Deductions

There are standard deductions that you can take advantage of, including personal exemptions. The standard deduction depends on your filing status and can vary each year.

It is vital to keep track of your receipts, as you may find that itemizing your deductions will save you more money versus the standard deduction.

Itemized Deductions

Itemization of your deductions can also help you save money on your taxes. Some of the typical deductions include mortgage interest, state and local taxes, medical expenses, and charitable contributions.

However, not all itemized deductions are created equally, so make sure to do your research before completing your taxes.

Education Expenses

If you are pursuing higher education, you can deduct tuition fees and student loan interest. The educational institution must qualify, and you will need to gather school transcripts and receipts to provide to your accountant.

If you have questions about specific education expenses, speak with a tax professional.

Retirement Contributions

Another standard deduction is IRA or 401(k) contributions. Contributing to your retirement account not only helps save for your future, but it can save you money on your taxes.

Ensure that you are contributing enough to your retirement account to receive the full benefit of the deduction. In conclusion, taxes can be overwhelming, but you can take advantage of tax deductions and credits to save money.

The unusual tax deductions and credits mentioned above are legal, but it is essential to ensure that you follow the IRS guidelines and keep accurate records. In addition, make sure you are taking advantage of standard deductions and are seeking tax advice from a professional.

Tax Credits 101: How to Save Money on Your Taxes

Taxes are an unavoidable part of life, but tax credits can help you save money on your taxes. Tax credits are a dollar-for-dollar reduction in the amount of taxes you owe, and there are several tax credits available to taxpayers.

Let’s take a closer look at five tax credits that will help you save money on your taxes.

Home Energy Tax Credits

The

Home Energy Tax Credits are available to homeowners who make energy-efficient home improvements. The tax credit is worth up to $500 for qualified improvements, such as adding insulation, installing energy-efficient windows or doors, or upgrading HVAC systems.

It is important to note that some energy-efficient improvements have a lifetime limit of $500, while others have specific limits per year. Be sure to research and keep track of all improvements made.

Child and Dependent Care Credit

The

Child and Dependent Care Credit is available to taxpayers who pay for childcare expenses or have a dependent who needs care, such as an elderly parent. The credit is based on the amount of money you spend on care, up to a maximum of $3,000 for one dependent or $6,000 for two or more dependents.

The percentage of the credit ranges from 20-35% of the qualifying expenses, depending on your income level.

Earned Income Tax Credit

The

Earned Income Tax Credit is designed for low to moderate-income individuals to help them keep more of what they earn. The credit varies depending on your income level, filing status, and number of dependents, but it can be worth up to $6,660 for the 2020 tax year.

Many people who qualify for the

Earned Income Tax Credit fail to claim it, so be sure to research and see if you are eligible.

Adoption Credit

The

Adoption Credit is available to taxpayers who have adopted a child. The credit can help cover the costs of adoption expenses, such as attorney fees, travel expenses, and court costs.

For the 2020 tax year, the adoption credit is worth up to $14,300 per child for qualifying expenses. Keep in mind that the credit is available only for adoptions of children under the age of 18 and has income limits.

American Opportunity Tax Credit

The

American Opportunity Tax Credit is available to students who are pursuing higher education. The credit is worth up to $2,500 per student for the first four years of post-secondary education, and it covers expenses such as tuition, textbooks, and other related fees.

To qualify for this credit, the student must be enrolled in a qualifying institution and pursuing a degree or other recognized credential. It is important to note that the income limits apply to this tax credit.

Common Tax Mistakes to Avoid

In addition to knowing which tax credits you can take advantage of, it is important to avoid common tax mistakes that can cost you money and time. Here are five common tax mistakes that you should avoid.

Failing to File or Pay Taxes

Failing to file or pay your taxes can result in severe penalties, including tax evasion charges. It is essential to meet the tax deadlines and pay the taxes you owe to avoid penalties and interest charges.

Not Claiming All Deductions

Many taxpayers leave money on the table by failing to claim all deductions they are eligible for. Make sure to keep track of all expenses and receipts and do thorough research or consult an accountant to ensure that you are claiming all eligible deductions.

Math Errors

Mathematical errors can happen, but these can attract IRS attention and lead to further examination of your tax returns. Ensure that calculations are correct and double-check all figures before submitting your tax returns.

Misreporting Income

Misreporting your income or failing to report any income can trigger a tax audit, and you may be subject to penalties and interest charges. Always report all income, including freelance or contract work.

Neglecting to Update Contact Information

The IRS uses the contact information on your tax returns to communicate with you regarding tax-related matters. Neglecting to update your contact information if you move or change phone numbers can result in missed deadlines or important deadlines not being met, resulting in various penalties.

In conclusion, knowing the tax credits available to you and avoiding common tax mistakes can save you time and money during tax season. Be sure to keep accurate records, research thoroughly, and consult an accountant to ensure you are taking advantage of all eligible tax credits and filing your tax returns correctly.

This article has covered tax credits, including unusual tax deductions and credits such as private jet travel and eco-toilets, and then delved into common tax mistakes to be avoided such as badly selected deductions or failing to pay taxes on time. It is crucial to know the tax credits you qualify for and understand how to claim them to save money on taxes while also avoiding common tax mistakes.

Keeping an accurate record, researching thoroughly, and contacting a tax professional when necessary can be incredibly beneficial, so it is essential to be diligent throughout the process.

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