While most of us are aware of certain tax write-offs like charitable donations and medical expenses, car and homeowners are entitled to more deductions than they often realize. Thats why SelectQuote Auto & Home has compiled this list of commonly overlooked auto- and home-related expenditures, all of which can be deducted from your income tax bill. Just be sure to consult a financial professional or visit the official IRS website before filing.
- Your new car. Yep, you read that correctly. If youre self-employed, you may be able to write off the purchase price of a new vehicle. Got your eye on an SUV? You may be looking at an ever bigger tax benefit.
- Your commute. On a project that requires more driving time than usual? The IRS lets you write off 56.5 cents for every mile that you drive for your job – provided that youre on a temporary assignment. You can even write off trips to search for a job, see a rental property you own, or do volunteer work.
- Smog test fees. Most states require car owners to prove that their vehicles don’t cause too much pollution in the way of carbon-based emissions. These smog tests can end up costing you a lot of money, especially when repairs are required in order for your car to pass. But heres the good news: You can write these costs off on your income tax return if you’re a business owner and your vehicle is used in the operation of your business.
- Registration and titling fees. All states charge an annual fee to renew the registration or license plate stickers on all vehicles – including those used for business purposes. Depending on the make and model of your car as well as your state of residence, these fees can cost you several hundred dollars a year. But if you use your vehicle exclusively for business purposes, you’ll be able to write off all of your registration and titling fees.
- Mortgage interest. After you purchase a home, youre allowed to deduct all of your interest payments on any mortgage up to $1 million. Certain restrictions apply, however. For starters, you can only deduct that interest if you are married and filing jointly. If youre married and filing separately, both you and your spouse can only claim interest payments up to $500,000. Finally, the mortgage debt in question must be secured by a first or second home.
- Home improvement loan interest. Loans taken out for home improvements may be deducted from your income taxes. Qualifying loans are not for repairs and fixes, however, but for capital improvements that will increase your home’s value, adapt it to new uses, or extend its life. Examples of capital improvements include adding another bedroom or garage, installing a pool, or landscaping your backyard.
- Property taxes. Property taxes are fully deductible from your income taxes on Form 1040. But if your money is being held in escrow for the purpose of paying your property taxes, you cannot claim this deduction until that money is actually taken out of escrow (and your property taxes are paid). If you receive a partial refund of your property taxes, this reduces the amount of the deduction that youre allowed to claim.
- Selling costs. If you decide to sell your home, its possible to reduce your income tax by the amount of your selling costs. These costs can include repairs, title insurance, advertising expenses, real estate broker’s commissions, and inspection fees. Selling costs are deducted from your gain on the sale. To calculate the gain on the sale of your home, subtract the closing costs and your tax basis from the selling price. Your tax basis can be calculated by adding the costs of any capital improvements you made to the original purchase price of your home, and then subtracting any depreciation.