For a variety of reasons, many Americans need to apply for an extension each year. But many still misunderstand what a tax extension really means. Yes, it’s true that when you apply for a tax extension, you get an extra 6 months to file your tax return; however, in the rush to file taxes late, many of those same people may miss out on valuable tax deductions that can reduce their taxable income.
Don’t let your tax extension cost you more. Take a look at some of the tax deductions extension applicants miss out on most often.
‘Out of pocket’ or ‘no cash’ charitable contributions
Even if you’re in a hurry, it’s hard to forget about those larger monetary charitable contributions. They usually leave a pretty obvious paper trail. But what about those smaller contributions made with your pocket change, your miles driven in service to a charity (14 cents per mile in 2022), or by donating goods and services to charities and nonprofits? local profit? When you’re past the April tax deadline and you’re in a rush to file your taxes, it’s easy to forget to take the time to add up all the little things.
Many extension applicants admit that they care more about filing before October than making sure they get all the deductions. Don’t forget that adding the little things can have a big impact!
State and local sales tax
The state and local sales tax deduction is a tax deduction that gives you the opportunity to choose between deducting state and local income taxes on large purchases or state income taxes. If you live in a state with no income tax (South Dakota, Washington, Alaska, Texas, Nevada, Florida, Tennessee, New Hampshire, and Wyoming), this is your chance to deduct state and local sales tax, since you will not have any state income tax to deduct. Even if you pay state taxes, your state and local sales tax paid on large purchases may exceed your state taxes, giving you a larger tax deduction.
Student loan interest
while federal student loan payments have been on pause. In general, if you did student loan payments on qualified student loans, the interest portion of up to $2,500 may be tax deductible. You can even deduct interest on your student loan if your parents are making their payments, as long as they don’t claim you as a dependent. According to the IRS, the payments can be seen as a financial gift from your parents.
Earned Income Tax Credit
IRS figures show that more than 25% of eligible taxpayers forget to file the Earned Income Tax Credit. Many people don’t know they qualify. According to the IRS, on average, households that claimed the EITC last year he claimed a credit of about $2,043. When you sit down to file your taxes, don’t forget to claim the Earned Income Tax Credit if you qualify.
Don’t worry about missing out on these valuable deductions and tax credits. TurboTax it will ask you simple questions and give you the deductions and tax credits you deserve based on your answers.
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