11 Tax Deduction Tips that Can Save You Hundreds (Part 2)

Are you missing out on some serious tax deductions? It might surprise you that the most overlooked tax deductions can save you the most money. 

No one likes to pay more money than they should, and taxes are no exception to the rule. 

With April 17 fast approaching, you need a thorough understanding of the deductions and credits you're eligible. This makes the difference between owing money and owing nothing. 

But trying to navigate the murky waters of which tax deductions apply to you can be very difficult--especially if you don't know where to look. 

Looking for (legal) ways to pay less on your taxes? Keep these 11 money-saving deductions in mind. 

1. Travel Expenses

Wouldn't it be great if you could deduct all your travel expenses? 

Unfortunately, you can't.

But, in some cases, you can deduct the cost of baggage fees. 

If you're self-employed and travel for business, you can actually count these fees as business travel deductions.

Additionally, there are a wealth of other travel expenses that are eligible. 

Expenses incurred during temporary work assignments in other cities are just one example.  

These include things like meals, accommodation, and transportation. It can also include expenses like laundry, parking, gas mileage, and even tips. 

Here's the deal:

This only applies when you're working away from home for one year or less.

Also, being in the National Guard allows you to write off travel expenses associated with drills or meetings. 

Members traveling 100 miles or more can deduct lodging expenses and half the cost of meals. If you use your car to drive to these drills, you can also deduct a portion of this expense as well.   

2.  Medicare Premiums 

If it surprises you to hear that medicare premiums can be tax deductible, you'll understand why this falls high on the list of the most overlooked tax deductions. 

Under many circumstances, having medicare parts B or D makes you eligible for a tax break.

How does the deduction work? 

Essentially, you claim your medicare premium--the amount you pay each month--as a medical expense.  

You can claim this break under two circumstances: being 65 or older OR being self employed. 

And there's even better news: 

If you're self-employed this tax deduction isn't subject to the 7.5 percent Adjusted Gross Income (AGI) test applied to seniors. 

However, to qualify, you cannot be covered under a health plan provided by an employer or spouse. 

3. Day Care Credit

Are you a busy parent who relies on child-care services? Well, the IRS is reimbursing you part of that money. 

The child and Dependent Care Credit is worth 20 to 35 percent of any child-care service needs. 

There are a few caveats, however. 

Firstly, the child must be age 13 or younger.

There are some exceptions, however. For example, disabled dependents can be of any age. 

Additionally, these child care services must have enabled you to work or search for work.

Finally, the IRS will only cover up to 35 percent of $3,000 for one child, or 35 percent of $6,000 for two children.

Eligible expenses include the cost of babysitting, daycare, or summer camp.  

But there's one other way you can save money.

When it comes to child care, one of the most overlooked tax deductions isn't really a deduction at all. 

If your employer offers a child-care reimbursement account, this allows you to use pre-tax dollars to pay for such costs.

This money isn't taxed, and you're reimbursed the full amount rather than 35 percent.

4. Lifetime Learning Credit

If you, or anyone in your household, are students, you may apply for the Lifetime Learning Credit.

There's no limit on the number of years for which you can claim this credit.

The credit applies to those enrolled in an institution for at least one academic period at the beginning of the tax year. Taking higher education courses to enhance employment skills also make you eligible. 

No matter you're age, you can qualify for this credit.

For example, taking courses at community college even after retirement also applies to this credit. 

5. Bonus Depreciation Credit

For business owners, bonus depreciation is a great way to save money. 

If you bought business property in 2016, bonus depreciation allows you to take a 50 percent deduction in the first year of service.

The deduction is applicable to all businesses and applies to most equipment. This also includes things such as computers software. 

As with most tax laws, however, there are stipulations.

First, your business must be a first-time user of the property. Next, only certain types of property are included in this deduction. These include water utility and improvement properties. 

Another money-saving break is something called "supercharged" or "beefed up" expensing. 

Essentially, this deduction allows you to write off the full cost of assets within first year you put them into service. 

You can claim up to $500,000 for qualifying equipment as long as your business owns less than $2 million in assets. 

6. Social Security Taxes

The self-employed are eligible for a number of tax breaks. Unfortunately, this usually where you'll find the most over looked tax deductions. 

For example, one lesser known deduction involves the social security tax. 

You can't deduct the 6.2 percent you pay as an employee. However, you can claim a deduction if you're self employed.

If you pay the full 12.4 percent social security tax, you can claim a tax break worth 50 percent of the amount you paid.

7. Alimony Legal Fees

Legal expenses are rarely ever tax deductible, and a divorce is definitely not one of them. 

However, if you secured alimony and sought the counsel of a lawyer in the process, you can claim his or her legal fee as an itemized deduction. 

Albiet, this deduction gets bundled under miscellaneous expenses. 

Remember, these expenses only become tax deductible once they exceed 2 percent of your income. 

8. Tax Penalty Waiver

Tax penalties occur when you file taxes late or make late payments. 

And these penalties can seriously add up. 

However, there are a few ways that you can get the penalty waived. 

 First time penalty abatement is the most popular. You qualify for this waiver if it's your first time filing OR if you've had no penalties for the past 3 years. 

But there's also another way to get the penalty waived.

If you're a taxpayer over the age of 62, and recently retired, you can request a waiver.

Why?

Well, if you retired last year, it's likely that you may have forgotten to make estimated tax payments. 

if you're use to having the taxes withheld from your paycheck, it's an understandable mistake.

But, if you forgot to pay them, you can request a penalty waiver on these grounds.

9. State Income Tax Refund

Most of the time your state income tax return is considered tax free. Itemizing deductions is only situation where this isn't the case. 

On the other hand, itemizing doesn't automatically make a state income refund taxable. 

If you deducted your State Income Tax on your federal return, then the refund is taxable. 

If you itemize and deducted things like state and local sales taxes, then you're still in the clear. 

10. Student Debt Interest

If you're paying off college debt, it might please you to hear that there's a tax deduction for interest on student loans. 

Curious to know how it works?

Each year, you can deduct up to $2,500 of student loan interest, depending on your income. 

Additionally, if your parents pay the debt for you, the IRS handles it as though that money was gifted to you, and then YOU paid the debt. 

That means that as long as you're not listed as a dependent, you're still eligible for the deduction. 

11. Tax Credit for College Students

Another bonus to being a student is that there are several tax credits and deductions that are applicable to your return.

This includes this American Opportunity Credit. This credit is applicable to the first four years of college.  

Additionally, the American Opportunity Credit is refundable. This means that anything left over from the credit gets refunded to you--up to $1,000 dollars. 

In fact, this particular credit is one of the few that can save you thousands--up to $2,500 to be exact. 

So don't let it go to waste by overlooking it. 

Conclusion

Saving money is one of the best feelings, especially on your taxes. 

So don't pass up any opportunity. 

Get informed about the tax law, the different forms, how they work. Having this knowledge readily available is the key to saving money. 

Also, if you need advice or more information, seek out a tax professional. In most cases their understanding can save you even more.

When it comes to your taxes, the best course of action is to become active and involved, especially when trying to find deductions you qualify for.

Do this and tax season will be a breeze.