If you want to shrink your tax bill or beef up your refund, claiming all the deductions you’re eligible for can be a smart strategy. Deductions reduce your taxable income. That’s a plus if you want to hang on to as many of your hard-earned dollars as possible. But there are limits on what you can deduct. A financial advisor can help you figure out exactly what you should do with your taxes. Here’s a look at some expenses you can’t deduct in most cases.
1. Pet Care Expenses
Fluffy may seem like a member of the family. But that doesn’t mean you can claim him as a dependent or get a deduction for his day-to-day care. You may, however, be able to claim a deduction for certain animal-related expenses if you own a business or you’ve donated pet food or other items to an approved charity.
2. Commuting Expenses
While business-related travel expenses (including the cost of flights and hotel stays) may be deductible, ordinary commuting expenses are not. If you take a bus, taxi or subway to get to work each day, you can’t deduct those costs on your tax return as business expenses. You may be eligible for a deduction, however, if you’re paying to travel to a training session or conference held outside of your office.
3. Donations to Non-Qualifying Charities
Giving to a good cause can help you out at tax time, but only if you’re making a donation to a qualified charity. Handing out cash to a friend or relative who’s struggling to find a job, for example, is certainly charitable. But it won’t help you score a tax break.
4. Home Improvement Expenses
Home improvement expenses generally aren’t deductible. One exception involves the renovations you make to a home office. Not everyone can take the home office deduction. But if you have a legitimate reason for claiming it, you may be able to deduct the cost of any upgrades you’ve made to your home office. While you can’t qualify for a deduction for giving your kitchen a makeover or adding a new sunroom, these projects may raise your property value. If that happens, you can write off the additional property taxes that you have to pay.
5. Gym Membership Fees and Plastic Surgery Expenses
The IRS doesn’t cut you a break if you decide to start hitting the gym or getting liposuction. There’s only a possibility that the cost of plastic surgery may be deductible if your doctor deems it necessary for your health and well-being.
6. Time Spent as a Volunteer
Volunteering can be an enriching experience and while there are certain volunteer-related expenses that you can write off, your time isn’t one of them. The IRS does allow you to deduct certain costs associated with volunteering, such as money you pay out of pocket to purchase a uniform and travel expenses that you weren’t reimbursed for while volunteering away from home.
7. Child Support Payments
If you’re on the receiving end of child support payments, they won’t count as taxable income. And if you’re paying child support, you can’t get an extra deduction. Alimony payments, on the other hand, are always tax-deductible if they’re made while a couple is legally separated or divorced.
8. Homeowners Insurance Payments
If you own a home, having the right insurance is a must if you want peace of mind. But unfortunately, there’s no deduction for paying your premiums. You can, however, deduct things like mortgage loan points, mortgage loan interest, real estate taxes and property taxes.
9. Babysitter Fees
The money you pay someone to watch your kids usually doesn’t have a place on your tax return. It may be deductible, however, if you can prove that someone was babysitting your children while you were volunteering for a qualified charity. There’s another upside if you’re paying childcare fees regularly. You may be able to recoup the cost of some of those expenses if you qualify for the Child and Dependent Care Credit.
Don’t Try to Bend the Rules
Attempting to sneak in a non-deductible expense when you file your taxes is a bad idea. If you get audited and you can’t prove that your deductions are valid, you could end up having to pay additional taxes, penalties and interest. Your best bet is to stick to deducting the expenses that have Uncle Sam’s seal of approval.
And remember, deductions aren’t the only way you can save money on your tax bill. Many financial advisors also offer tax minimization strategies as part of the financial planning process. A matching tool like SmartAsset’s SmartAdvisor can help you find a person to work with to meet your needs. First you’ll answer a series of questions about your situation and goals. Then the program will narrow down your options from thousands of advisors to three fiduciaries who suit your needs. You can then read their profiles to learn more about them, interview them on the phone or in person and choose who to work with in the future. This allows you to find a good fit while the program does much of the hard work for you.
Tips to Get Through Tax Season
- Figuring out the best tax strategy for your finances can be complicated, but finding a financial advisor to help you do them doesn’t have to be. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- If you choose to itemize, keep all your receipts for at least a few years after you file. It isn’t uncommon for the IRS to also look at returns from three to six years prior to the return they are actually auditing. And depending on which deductions you take, like the home office deduction, your return may be more likely to trigger an audit.
- If you need help filing your taxes, there are many services to choose from. Two of the most popular, H&R Block and TurboTax both offer a user-friendly design with good explanations of the filing process. Here’s a breakdown to help you decide which service may be better for you.
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