Missing out on valuable deductions and credits
Sure, you can do your own taxes instead of hiring a professional. But if you do decide to file taxes on your own, try to find out everything there is to know about the available tax credits and deductions. One in five DIY tax filers “miss out on an average of $460 in write-offs, for a collective $1 billion each year”, according to H&R Block.
Pay attention to deductions such as medical expenses, teachers’ classroom supplies, business use of your home and common credits such as child and dependent care credits or credits for higher education expenses.
“The U.S. tax code is incredibly convoluted, and therefore, it’s difficult to know what you don’t know. As such, it’s generally a good idea to either do your taxes using professional software or have them done by a credentialed tax return preparer,” Panko said.
Related: 10 Oddball Tax Deductions You Won’t Believe Are Real
Counting on outdated write-offs
Knowing that you will receive a big tax refund can make you spend more. However, the tax code has gone through various changes and many of the write-offs you were counting on may no longer be valid. “Because these are fairly recent changes, taxpayers can overlook this and spend more in ways that will no longer benefit them”, said Stephanie Hammell, a wealth advisor at LPL Financial. For more information, here are 14 Most Overlooked Tax Write-Offs You Don’t Want to Miss!
For instance, you can no longer deduct entertainment expenses but “if you’re planning to take out clients to an impressive dinner, weigh out the tax implications first … there’s now only a 50% deduction available, and this is only if the self-employed individual is present during that time and that impressive dinner isn’t too extravagant,” Hammell said. See also 10 Surprising Things That Get Taxed By IRS.
