For Americans, anxiety is too often the rule come tax time, and with jangling nerves also comes a tendency to lose focus and forget some key deductions.
That's a big financial no-no, as taking all the legitimate deductions possible can strip away a healthy slice of your annual tax burden.
Make no mistake, the I.R.S. doesn't make it easy to find all the deductions available, simply because the federal government can't afford to lose the money.
According to data from the Joint Committee On Taxation, widely-used tax breaks costs Uncle Sam about $4 trillion between 2014 and 2018. That's money lost to tax deductions, tax credits, and income excluded from taxation, for one reason or another.
The answer? Keep your slice of that $4 trillion by taking tax breaks you have coming, and let the federal government to dig up some cash elsewhere, well away from your pocketbook.
Start with these great deductions and credits when you file your taxes this year:
State sales taxes - This write-off makes sense primarily for those who live in states that do not impose an income tax, states Ken Mahoney, CEO of Mahoney Asset Management, in New York City. "First, you must choose between deducting state and local income taxes, or state and local sales taxes," he advises. "For most citizens of income-tax states, the income tax deduction usually is a better deal. The IRS has tables for residents of states with sales taxes showing how much they can deduct. But the tables aren't the last word." Mahoney says that if you purchased a vehicle, boat or airplane, you get to add the state sales tax you paid to the amount shown in IRS tables for your state, to the extent the sales tax rate you paid doesn't exceed the state's general sales tax rate. "The same goes for home building materials you purchased," he adds. "These items are easy to overlook. The IRS even has a calculator to help you figure out the deduction, which varies by your state and income level."
Out-of-pocket charitable contributions - It's difficult to overlook the big charitable gifts you made during the year by check or payroll deduction. But the little things add up, too, and you can write off out-of-pocket costs you incur while doing good deeds, Mahoney says. "Ingredients for casseroles you regularly prepare for a nonprofit organization's soup kitchen, for example, or the cost of stamps you buy for your school's fundraiser count as a charitable contribution," he notes. "If you drove your car for charity in 2016, remember to deduct 14 cents per mile."
Go to school on AOC credit - "The tax break that I most often see overlooked on returns is the American Opportunity Credit (AOC), which offers a $2,500 credit for paying $4,000 of college tuition," notes Joseph Orsolini, a certified financial planner with College Aid Planners, Inc. One reason families miss out is that the document (1098-T) used to prepare the credit is made in the name of the student, Orsolini says. "But since the parents claim the student as a dependent, the parents should claim the credit," he says. The other significant challenge with this tax credit is that many colleges no longer mail out the 1098-T document, he adds. "College students are expected to know to log on to the college web portal, find and print the 1098-T, and give it to their parents," he says. "As you can imagine, that doesn't happen as often as it should."
Go to "Q" school, too - If your health insurance plan is a Qualified High Deductible Health Plan (QHDHP) fund those health savings accounts (HSA's) to the maximums the IRS allows, advises Joe Luscavage, a tax specialist with Tycor Benefit Administrators, Inc., in Berwyn, Pa. Contribution limits are $3,400 for single filers and $6,750 for families.in 2017. There's also a $1,000 additional contribution option for everyone on a high deductible health plan who is over 55, Luscavage adds. "There's nothing like it in the tax code," he says. "Money goes in tax free, grows in the account tax free -- if you invest it -- and as long as you make distributions in accordance with IRC 213(d) -- i.e., the "Medically Necessary" statute -- distributions are not taxed." There is no means testing, and the accounts can be funded in addition to a retirement account like a 401(k). Plus, once you hit retirement you can make non-penalty distributions for anything - it's taxed like a 401(k) distribution. "Most individuals who elect a QHDHP don't understand the HSA and what you can really do with it,"Luscavage says. "Every dollar that goes in there is like getting $1.40 after taxes."
Take tax breaks for healthy and eco-friendly living - Vincenzo Villamena, managing partner at Online Taxman, a boutique CPA firm in Hartsdale, N.Y., says there's a good tax credit for making your house energy efficient. "That includes installing windows, energy saver heaters, and insulation - things like that," he says. "With those moves, you can get a tax credit up to $1,000," he says. "There's also a credit for biking to work. It's a little-known credit for people to take in conjunction with their employer if they bike to work." Ask your tax specialist for more details.
There's really no good reason not to take the above deductions - and any other tax breaks you qualify for - and save some big cash in the process.
If not, Uncle Sam will be more than happy to keep your money.
Editors' pick: Originally published March 10.
More Tax stories from TheStreet: