10 surprising tax perks to save you money: Deductions and exemptions you might not know of
True or false: You can claim your broke roommate as a dependent on your taxes? Believe it or not, it's true! So long as your deadbeat friend meets the Internal Revenue Service's criteria for a dependent.
That's not the only weird exemption or deduction available to reduce your taxable income, either. Since lots of deductions require tracking paperwork and squirreling away receipts, close to 70% of tax filers take the standard $6,300 break for individuals or $12,600 for joint filers, according to the IRS.
But everyone should consider itemizing instead, as it could uncover significant savings, Lisa Greene-Lewis, CPA and tax expert at TurboTax, told Mic.
"Sometimes you have expenses that could be itemized, and if you take the time and gather receipts it may open you up to saving much more money," she said. "Even if you don't maintain paper receipts, you can access bank and credit card statements online so you have the ability to locate your payments and get those extra deductions."
Before you file your tax returns to Uncle Sam, check out our list of deductions and other perks you shouldn't miss.
1. You can claim a roomie as a dependent
It's true: You can reduce your taxable income by $4,050 in 2016 if you claim a partner or roommate who lived with you for the entire year as a dependent: "In the circumstance where your boyfriend, girlfriend or roommate is starting a new business or is between jobs and you lived together, you can take that deduction," Greene-Lewis said.
There are a few catches. Your dependent's 2016 gross income must be less than $4,050, you must have supplied more than half of their total support for the year, and they can't be someone else's dependent.
While you don't have to provide documentation to the IRS when you file, you must be prepared to prove you covered more than half of that person's living expenses for the year, according to TurboTax.
2. You might be able to deduct pet expenses
Service dogs used for a medical condition or dogs used for business purposes, such as guard dogs, can provide you with an itemized deduction, Lewis-Greene said. "You could deduct the expense of the dog such as food, training, medical expenses and travel," she explained.
Other pet-related expenses where you can find deductions include animal fostering and charitable donations to shelters or rescue.
Unfortunately, emotional support therapy animals do not qualify. "When it comes to support, only dogs that qualify as a certified service dog for a medical condition can be claimed," Greene Lewis said.
3. You can deduct education transportation expenses
Taking a few graduate courses after work? Now you can deduct the expense for travel to and from class, which includes gas, tolls and parking. For 2016, "you can deduct $0.54 per mile and this covers travel from work to class and then class to home," Greene-Lewis said. "Also, the college course does not have to be specific to your job."
The deduction isn't limited to car travel either. You can deduct costs of the bus, subway, cab, or other fares, the IRS says. Keep receipts and track travel expenses for this itemized deduction.
4. You can deduct costs of charity work
Your volunteer work in 2016 isn't lost on the IRS, and they'd like to provide you with a deduction for your efforts. You can deduct travel, lodging and expenses not covered by the charity.
You can only claim this itemized deduction on your taxes for 501(c)(3) charities recognized by the IRS. "For instance you can't claim a deduction if you attended the Women's March in Washington, D.C., but you can get that deduction if you volunteered for a charity that provided disaster relief," Greene-Lewis said.
5. You can deduct student loan interest — even if you aren't the one who paid it
Even if your parents or grandparents paid your student loan, you can still deduct the interest on your return. "As long as your parents did not claim you on their taxes you can deduct up to $2,500 in student loan interest," Lewis-Greene said. Student loan interest is considered to be an above-the-line deduction, which lowers your adjusted gross income and can be taken without itemization.
6. You can deduct job search expenses
Looking for a new position can be expensive, but the good news is you can take deductions for job search expenses. "You can take a deduction if you paid to have your resume done, worked with a placement agency or traveled for the job interview," Greene-Lewis said. "This is an itemized expense, so keep your receipts and track your expenses."
You don't even have to land the job to earn the deduction either. One caveat? The deduction is applicable only for those seeking a job in the same field as a previous gig. "You can't take the deduction if you just graduated from college and are looking for work or if you are switching fields," Greene-Lewis added.
7. You can deduct the cost of school supplies, if you teach
Teachers can spend something like $500 a year of their own money to buy supplies for their students and classrooms, as Time reports. What educators may not realize is they can deduct up to $250 for unreimbursed expenses, including computer equipment, athletic supplies and classroom materials.
This is an above-the-line item deduction, so all teachers should hop on board.
To be eligible, you must be "a kindergarten through grade 12 teacher, instructor, counselor, principal or aide for at least 900 hours a school year in a school that provides elementary or secondary education as determined under state law," the IRS notes.
8. You can deduct moving costs for a job
Did you move for a job in 2016? "You can deduct moving expenses, which includes paying for storage space, moving items and even what you had to pay to move your pet," Greene-Lewis said. The IRS allows you to take the deduction for moving expenses where the job is located 50 miles away from your current residence or at least 50 miles further than your old job was from your current home. This is an above-the-line deduction.
9. You can deduct vehicle expenses if you're a ride-sharing driver
People who drive for companies like Lyft, Uber or other car sharing companies are considered independent contractors and can deduct all business expenses including the cost of gas, car repairs, insurance and maintenance for their business vehicle, TurboTax notes.
Drivers should maintain detailed records, especially if you use your vehicle for both your ride sharing job and personal use. "The IRS could disallow any tax deductions you can't support," TurboTax adds.
10. You can deduct medical expenses
A slew of medical expenses not reimbursed by your employer can be tax deductible. You can deduct certain medical costs that are more than 10% of your adjusted gross income for that year. This includes preventative care, surgeries, dental, psychologist or psychiatrist visits, prescription medication and prescription eyeglasses. You can even deduct the cost of transportation for medical care, like the taxi bill you paid to get to the doctor.
What's not covered? Any cosmetic procedures or over-the-counter medications such as nicotine patches, vitamins or weight loss foods. Keep your receipts if you want to take the itemized medical expense deduction. It could save a you a bundle come tax time.
Here's the full list from the IRS of all deductible medical expenses.
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