The 12 Most Overlooked Tax Deductions

By Kevin McCormally, Editorial Director, Kiplinger publications
--(Business Wire)--It's all too easy to miss a trick and overpay Uncle Sam,
especially for taxpayers who take a standard deduction and assume
additional tax breaks only apply to itemizers.

Here are a dozen of the most overlooked tax deductions, all
taxpayers can qualify for -- except where noted as (itemizers only).

1. State sales taxes. All taxpayers have a shot at this write-off,
however citizens of income-tax states must choose between deducting
state income taxes or state sales tax. IRS offers a standard sales tax
deduction for those who don't want to save receipts all year. Plus, if
you purchased a vehicle, boat, airplane or home building materials,
you get to add the state sales tax you paid to the amount shown in IRS
tables for your state.

2. $250 educators' expenses. Teachers and aides can deduct up to
$250 for books and classroom supplies bought in 2007.

3. College tuition. You may qualify to deduct up to $4,000 in
college tuition paid in 2007 for yourself, your spouse or a dependent.

4. Student loan interest paid by Mom and Dad. Until recently, if
parents paid back a student loan incurred by their children, no one
got a tax break. Now if Mom and Dad pay back the loan, IRS treats it
as though they gave the money to their child, who then paid the debt.
So, a child who's not claimed as a dependent can qualify to deduct up
to $2,500 of student loan interest paid by mom and dad.

5. Out-of-pocket charitable contributions (itemizers only). It's
easy to overlook the small out-of-pocket costs you incur for charity,
such ingredients for casseroles you regularly prepare or the cost of
stamps you buy for your school's fundraiser.

6. Job-related moving expenses. For a first job, if you moved more
than 50 miles from your former residence, you can deduct the cost of
getting yourself and your household goods to the new area, including
20 cents a mile (and parking fees and tolls) for driving your own car.
If a new job is at least 50 miles farther from your old home than your
old job was, you can take the same deductions.

7. Military reservists travel expenses. If you are a member of the
National Guard or military reserve, you may travel expenses to drills
or meetings if you travel more than 100 miles and stay overnight. You
can deduct the cost of lodging and half the cost of your meals, plus
48.5 cents a mile (and any parking or toll fees) for driving your own
car.

8. Estate tax on income inherited. If you inherited an IRA, you
get an income-tax deduction for the amount of estate tax paid on the
IRA balance. You apply the deduction when you withdraw from the IRA.
(Only itemizers benefit from this, but the tax deduction from a large
payout could qualify one to itemize.)

9. State tax you paid last spring. Did you owe tax when you filed
your 2006 state tax return in the spring of 2007? Then remember to
include that amount with your current state-tax deduction on your 2007
return.

10. Refinancing points. When you buy a house, you get to deduct
points paid in the year you acquired a mortgage. When you refinance,
though, you have to deduct the points over the life of the loan. In
the year you pay off the refinanced loan -- because you sell the house
or refinance again with a different lender -- you may deduct all
as-yet-undeducted points.

11. Reinvested dividends. If, like most investors, you have mutual
fund dividends automatically invested in extra shares, remember that
each reinvestment increases your "tax basis" in the fund. That, in
turn, reduces the taxable capital gain (or increases the tax-saving
loss) when you redeem shares. Forgetting to include the reinvested
dividends in your basis -- which you subtract from the proceeds of
sale to pinpoint your gain -- means overpaying your tax.

12. Jury pay paid to employer. If your employer pays your full
salary when you are on jury duty, but asks for your jury duty pay,
remember to deduct this amount from your taxable income. The IRS taxed
you for the jury duty pay.

Are you looking for more tax deductions? Visit Kiplinger's What's
Deductible? Taxopedia. Plus, find tax help at our tax center,
http://www.kiplinger.com/taxcenter/

Trylon SMR
Joyce Artinian/Chris Spagnuolo
212-725-2295
joyce@trylonsmr.com/chris@trylonsmr.com

Copyright Business Wire 2008