2010 was a whiplash year for tax changes, from sweeping legislation to the will-they-won’t-they buzzer-beater debate on the Bush Tax Cuts extension. All those changes mean more confusion than ever. So, enjoy the updated overlooked tax deductions for the 2011 filing season.
1. Mortgage Insurance Premiums
Although most people remember to deduct mortgage interest they paid, many forget that mortgage insurance premiums are also deductible. In order to qualify, the policy must be for a debt used to purchase a first or second home. This deduction was due to expire at the end of last year, but was extended through 2011 as part of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010.
2. Out-of-Pocket Educator Expenses
Another tax benefit that was extended at the last minute is the deduction available to teachers and educators who make out-of-pocket expenses, up to $250. You can read more about this deduction in this blog entry I posted earlier in the year.
3. Unreimbursed Job Expenses
If you have to make a purchase for work, you may qualify to deduct those expenses on your tax return. However, the IRS considers only specific expenses allowable, and they must be considered ordinary and necessary. To find out more about this deduction read this article on the RDTC Tax Help Blog.
4. Student Loan Interest
If you paid interest on a student loan for your own, your spouse’s or your dependent’s education, you may be able to deduct up to $2,500 worth of interest. This deduction is considered above-the-line, so you can claim it even if you do not itemize. Just keep in mind that there are strict income limits for this deduction in 2011.If you make more than $75,000 for single filers or $150,000 for married couples filing jointly, you may not be able to claim it.
5. State Tax Deduction
Remember that you can deduct your state income or sales taxes on your federal return. The deduction has been extended through 2011, so be sure to keep track of all state and local taxes you pay. To determine if you should claim your income or sales taxes paid you can use this calculator at IRS.gov.
6. Qualifying Legal Fees
Most fees paid to an attorney are not considered deductible. However, there are a few exceptions such as fees paid to an attorney related to a class action suit, estate tax advice, and alimony collection expenses paid to a lawyer. However, the deduction is subject to the 2% miscellaneous deduction limit.
7. Alimony Payments
Speaking of alimony, if you are required to make alimony payments, you may be able to deduct them on your tax return. You will need to file an itemized return, and must meet a few IRS qualifications. For more information, you can find details about the deduction in this article on the RDTC Tax Help Blog.
8. Business Tax Deductions
If you run a business, there are plenty of deductions you should look out for to reduce your tax liability. Including but not limited to: advertising and promotion costs, license and registration fees, legal and professional fees, Internet-related expenses, wining and dining clients, etc. For more information check out this article I wrote for WomenEntrepreneur.com on 10 tax deductions you can't afford to miss!