Last tax season might be well behind us but the next one is only about six months away. That doesn’t mean you shouldn’t be thinking about planning opportunities now, including what you can and can’t deduct. Being able to deduct certain expenses you have paid throughout the year comes down to what Uncle Sam says you can and can’t. There are crazy things taxpayers never think of deducting, and then there are common deductions people miss simply because of poor record keeping. Below we’ve outlined 3 crazy and 3 common deductions that you may not realize you can take.
3 of the Craziest Tax Deductions
1. Swimming Pool Costs
Doctors can prescribe many different ways to better ourselves whether that is medication, exercise, or meditation. Swimming is very beneficial for many injuries and physical limitations. Thus, if a doctor has suggested that swimming will help improve your medical condition, and you go out a purchase a swimming pool, the expenses associated with the purchase and installation of your new water haven may be deductible. This would only qualify in a case where a pool has been prescribed and is to be used for medical purposes, as opposed to recreational. It’s been done in the past and the IRS approved the deduction. Of course, this deduction is subject to medical & itemized deduction limitations.
2. Costs for Getting in Shape
Similarly, doctors may notify their patients that exercising and losing weight will benefit their life and prevent them from dangerous health conditions. In this case, with a written doctor’s note for the prescribed course of action, weight-loss expenses may be deductible. These can include gym memberships, healthy eating programs, or other proven remedies to help reduce one’s weight. Again, this is something that would be subject to medical & itemized deduction limitations.
3. Your Child’s Summer Camps
Dependent care expenses are often thought to include those paid throughout the school year while working parents are at their job. But summer camps can qualify too if you are paying someone to essentially watch your child(ren) while you work even though the choice may have been theirs to attend. The key here is that the summer camp cannot be a “sleep away” camp and must be a program that allows both parents to work or look for work while the child(ren) attend. Remember to keep copies of the documents for sending your dependents to camp and that this deduction is limited to the dependent care expense deduction limitations.
3 Commonly Missed Tax Deductions
1. State Sales Tax
Tax payers can take advantage of deducting their state sales tax. This is most beneficial for those who live in states without state income tax or they have little income tax withheld. All taxpayers have the choice of either deducting the state income taxes or state sales taxes paid during the tax year. Whichever saves you the most money is the one you should go with. But don’t worry, you don’t need to keep all of your sales receipts for this deduction. Instead, the IRS provides a calculator based on where you reside, your income, and your state and local sales tax rates. Big-ticket items such as car and boat purchases are also included as part of the calculator. This deduction is subject to the itemized deduction limitations so not everyone will qualify.
2. Gambling Losses
No one likes to lose, especially if you head to Vegas for a few days and maybe put “too” much money into the machines or onto the tables. Gambling winnings above certain amounts (more information at our blog here) must be reported on your tax return. Luckily though, gambling losses can be deducted against these winnings up to the amount of winnings reported. If you’re planning to deduct gambling losses be very diligent in tracking your activity with losing and winning ticket receipts with information on where you were, the date and type of gambling, and the amounts you have won or lost.
3. College Credit for Continuing Education
Training and continuing education are important parts of job development. Whether you’re a fresh out of high school student, have been at your job for 20 years, or are returning to college while in retirement, you may be able to take the Lifetime Learning credit. This credit does not have a limit on the number of years you can claim it. It is worth up to $2,000 a year based on 20% of up to $10,000 spent on post-secondary courses that lead to new or improved job skills. So, if you’re taking night classes randomly to get ahead with your existing (or new) career path, make sure you tell your tax preparer so they can get you this credit.
Be sure to track any expense you think you might be able to deduct, and if you have questions you can of course reach out to us here at Eliseo CPA, PLLC and we’ll be happy to help!