If there is one thing many Americans dread every year, it is paying their taxes. Most people look for effective things they can do throughout the year that will help lower their overall tax burden at the end of the year. It is important, however, that you understand exactly what can be deducted from your taxes before the end of the year. To help you reduce your overall tax burden this year, here is a list of seven ways to get tax exemptions for 2014 that you may not have considered.
1. Energy-Saving Improvements to Your Home
In an effort to reduce the amount of greenhouse gasses entering the atmosphere, the United State government has created a tax deduction policy for making energy-saving improvements to your home. You may be able to deduct as much as 30% of the cost for various energy-saving improvements, such as the installation of a solar water heater, energy-efficient furnace, pigmented roof, and skylights.
2. Cash Donation
Cash donations to official charities are another great way to save money on your taxes. You must make sure that you are donating to a legitimate organization that is an IRS-approved charity and maintains a proper 501(c)(3) status. Be sure to save a copy of your cancelled check and/or any documentation you receive from the charity.
3. Education Expenses
Educational expenses can also be deducted from your taxes. This is true for young students just completing their initial college degree, or for older students going back for additional credits. You may qualify for a tax credit of up to $2,500 with the American Opportunity Credit, the Hope Credit or the Lifetime Learning Credit. You may also be able to take several deductions for the cost of tuition, fees, books, or interest paid on your student loan.
4. Out-of-Pocket Medical Expenses
If you itemize your taxes and your out-of-pocket medical expenses were more than 7.5% of your adjusted gross income, you may be eligible to take a tax deduction for these expenses. You must keep track of all of your medical expenses during the year and this amount cannot include any cosmetic treatments or surgeries.
5. Donating Your Car to Charity
Another great way to save on your taxes that many people do not think about is to donate your car to charity. It does not matter what the condition of your car is when you sell it. In fact, it does not even need to be running at the time. You want to make sure you go through a legitimate 501(c)(3) nonprofit and ensure you get proper documentation at the time you donate your car. To make it easier for yourself, look for an organization that will come pick the car up at your location.
6. Job Hunting Credits
If you are currently unemployed, the government has implemented some tax deductions to offset some of your job hunting expenses. These expenses can include transportation to and from job interviews, lodging and food expenses when traveling to out-of-town interviews, printing of business cards, and employment agency fees. In order to deduct these expenses on your taxes, they must equal at least 2% of your adjusted gross income.
7. Refinance Your Home
With lower interest rates, many homeowners have considered refinancing their home. If you are thinking about this option, or have already refinanced your home, you can take a tax deduction on the points you had to pay for the refinancing. The only trick is you will have to span this deduction over the life of your of loan. So if you refinanced for a 25-year loan, you will be able to take 1/25 of the fees of the point over the next 25 years.
All of these tax deductions will help lower your overall tax burden at the end of the year. The main thing to remember is to save all the necessary documentation and paperwork. This will be necessary when filing your taxes at the end of the year and will be required if you are ever audited by the IRS. These expenses or donations must occur in the calendar year for which you are filing your taxes in order to claim them.
Written by Joseph Peterson of Goodwill of Greater Washington, an organization established in 1935 which has since helped tens of thousands of community members from the Washington DC Metro Area find gainful employment through the support of household and vehicle donation programs.