Most Overlooked Deductions

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State taxes you paid last spring. Did you owe when you filed your previous year state return in the following spring? Then remember to include that amount with your state deduction on your following years return, along with state income withheld from your paychecks or paid via quarterly estimated payments.

State Sales Taxes. You must choose between either deducting state income or state sales, for most people living in income taxed states, the deduction is generally a bigger deduction.

For Sales, the IRS has a calculator on its Web site to help you figure out the deduction, which varies by your state and income level.

Reinvested Dividends. This isn’t really a deduction, but a subtraction that can save you money. If you have mutual fund dividends automatically invested in extra shares, remember that each reinvestment increases your basis in the fund. That in turn, reduces the taxable capital gain, or increases the saving loss when you redeem shares. Remember to include the reinvested dividends in your basis which you subtract from the proceeds of sale to pinpoint your gain so you don't overpay.

Student loan interest paid by Mom and Dad. If Mom and Dad pay back a student loan, the IRS treats it as though they gave the money to their child, who then paid the debt. So, a child who’s not claimed as a dependent can qualify to deduct up to $2,500 of student loan interest paid by Mom and Dad.

Moving expense to take first job. Moving expenses to get to that first job are deductible, and you get this write-off even if you don’t itemize. If you moved more than 50 miles, you can deduct the cost of getting yourself and your household goods to the new area, including 20 cents per mile along with parking fees and tolls for driving your own car.

Military reservists’ travel expenses. If you are a member of the National Guard or military reserve, you may qualify for a deduction for travel expenses to military events. To qualify, you must travel more than 100 miles and be away from home overnight. If you qualify, you can deduct the cost of lodging and half the cost of your meals, plus 48.5 cents per mile and any parking or toll fees for driving your own car. You get this deduction whether or not you itemize.

Child care credit. A credit is so much better than a deduction—it reduces your bill dollar for dollar. So missing a credit is more costly than missing a deduction which simply reduces the amount of income that’s subjected to it. See Child Credit for more info

Refinancing points. When you buy a house, you get to deduct points paid to obtain your mortgage in one fell swoop. When you refinance a mortgage, though, you have to deduct the points over the life of the loan. That means 1/30th a year if it’s a 30-year mortgage—that’s $33 a year for each $1,000 of points you paid. And, in the year you pay off the loan, because you sell the house or refinance again, you may get to deduct all the remaining undeducted points, unless you refinance with the same lender. In which case, you add points from the new loan to the leftovers from the previous loan and deduct the expense portion-ably over the life of the new loan.

Jury pay, paid to employer. Some employers continue to pay employees’ full salary while they are doing their civic duty, but ask that they turn over their jury fees to the corporate treasury. The only problem is that the IRS demands that you report those fees as taxable income. You need to deduct the amount, so you aren’t charged on money passed through your hands.

Estate charges on income in respect of a decedent.  If you inherited an IRA from someone whose estate was big enough to be subject to the federal estate taxes. Basically, you get an income deduction for the amount of estate paid on the IRA balance. Itemized deduction Schedule A.

Deductions Standard