According to Brian Horne, MSA PA, taking advantage of all the correct deductions is one of the biggest challenges people face during tax season. Though some try to take too many deductions, most are put off by misconceptions and hassle and miss out on potential money-saving opportunities.
“They don’t know what they can take, so they don’t take anything,” said Horne, with Half Priced Tax and Accounting in Bountiful. “They miss a bunch of stuff.”
One area where people struggle with their deductions is in charitable contributions. As long as the donation is properly documented, there’s no cap on the amount of in-kind charitable contributions a person can claim.
“If you have a receipt, you can deduct the current value of as much as you gave away,” he said.
Having the right receipts, however, can be more complicated.
Though Horne said that the IRS isn’t picky about donations under $100, anything more expensive than that should have a receipt in case an audit happens.
For more expensive donations, he suggests creating an itemized list of all the items you’re donating, along with their current value. That value can be determined by how much the items could be resold for, amounts that can be found by perusing through the local Deseret Industry for comparisons.
“If they’re selling shoes for $7, you can put down that value for any shoes you’re donating,” he said. “They’ll put everything on the receipt, and you can staple the list to it for your records. That way, you can have backup on everything you do.”
It’s also possible, at times, to deduct mileage as part of your charitable contributions.
“There’s a lot of people who go back and forth to volunteer at the temple or the local food pantry,” he said. “As long as you’re not getting paid, it’s a possible deduction.”
Those taking college classes also often miss out on deductions, claiming only tuition instead of looking deeper for other possibilities. For example, there are benefits if a student’s job relates to what they’re currently studying.
“If the job can be seen as working their way to a career, they can deduct mileage,” he said.
People who make a side income of any sort, from consulting to mowing lawns, face the most challenges when it comes to finding the right deductions. Many costs related directly to the running of the business can be deducted from your taxes, but not all of them.
“I get people who you’d think would know a lot, like insurance agents, and they don’t do it right,” sad Horne. “I think I’ve had one person do it right in five years.”