What is a Commonly Missed Tax Deduction for Tax Accountants?
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What is a Commonly Missed Tax Deduction for Tax Accountants?
When it comes to navigating the labyrinth of tax deductions, insights from a company founder specializing in accounting practices reveal opportunities like maximizing home office deductions. Alongside this expert advice, we've gathered additional answers that highlight commonly overlooked areas which could save clients significant money. From ensuring every charitable contribution is accounted for to correctly computing vehicle depreciation, here are six valuable tips for capturing those elusive tax breaks.
- Maximize Home Office Deductions
- Claim Work-Related Education Expenses
- Track Charitable Contributions
- Consider State Sales Tax Deduction
- Compute Vehicle Depreciation Correctly
- Deduct Eligible Investment Fees
Maximize Home Office Deductions
I have seen that one frequently overlooked tax deduction is related to home offices, particularly for those who work remotely or run their business from home. Many clients miss out because they are unsure about what qualifies or how to calculate it properly.
To ensure our clients capture this benefit, we start by reviewing the specific criteria that define a dedicated home-office space. We then guide them through the process of accurately documenting their home-office expenses, such as utilities and rent, proportionate to the office's square footage. We make it a point to discuss this deduction during our initial consultations and annual reviews, ensuring that no eligible client misses out on these potential savings. This proactive approach helps our clients understand and utilize this deduction effectively.
Claim Work-Related Education Expenses
Many tax accountants may inadvertently overlook the deduction for unreimbursed work-related education expenses. This can occur when an individual has paid for courses or training that are directly related to their current job and that help maintain or improve their skills. Such educational expenses might include tuition, books, supplies, lab fees, and sometimes transportation.
It’s important to note that these expenses must be necessary for the taxpayer's job or legally required in order to perform their work. Taxpayers who've incurred such costs should consult with their tax professional to ensure they're taking advantage of this potential deduction.
Track Charitable Contributions
Out-of-pocket charitable contributions are another area where deductions often go unnoticed. When people give small amounts to charity throughout the year, they may forget to keep track of these donations. Items like ingredients for a soup kitchen or stamps bought for a school fundraiser can add up.
It's critical for taxpayers to keep their receipts or to maintain a log of their charitable expenses. Taxpayers should be diligent in recording these contributions to claim their rightful deductions.
Consider State Sales Tax Deduction
The state sales tax deduction is frequently missed because it requires taxpayers to choose between deducting state income taxes or state sales taxes. Since most people automatically opt for the state income tax deduction, they may not realize they could save more by choosing the sales tax deduction if they made significant purchases like a car or appliances. This is especially true in states that do not levy an income tax.
Keeping a record of major purchases and calculating the total sales tax paid can reveal if the sales tax deduction is more advantageous. Tax professionals should encourage clients to consider both options before deciding which deduction to take.
Compute Vehicle Depreciation Correctly
Depreciation on a business-use vehicle is a deduction that is sometimes forgotten by tax accountants. This occurs especially in cases where a vehicle is used both for personal and business reasons, and the business portion of vehicle expenses has not been calculated.
The depreciation deduction can provide a significant tax benefit over time as it allows for the cost of the vehicle to be spread out over the course of its useful life. Taxpayers should provide detailed logs of their business-related vehicle use to ensure their accountant can accurately compute this deduction.
Deduct Eligible Investment Fees
Although investment fees and expenses can put a dent in one's earnings, they are often overlooked during tax preparation. This includes fees for the management of investment accounts, such as advisory costs, and expenses related to the collection of investment income, such as the cost of a safety deposit box. While it is true that certain investment expenses have been affected by recent tax law changes, it remains important for taxpayers to discuss with their accountants what expenses are still deductible.
This ensures that they are not missing out on opportunities to lower their taxable income. Taxpayers should gather all relevant documentation regarding investment expenses when meeting with their tax advisors.