tax bill

It's a pretty good feeling to get that tax return check in the mail, but a pretty bad one to realize you forgot to include a tax deduction that would have lowered your tax bill or increased your returns. With the ever-increasing complexity of the tax laws, filing taxes just gets more and more complicated. To help simplify things, we assembled a list of some of the most commonly overlooked tax breaks you should take advantage of.

Student Loan Interest

Student loan payments can be a significant part of your monthly expenses, but luckily you can claim up to $2,500 in interest paid on student loans for higher education. This deduction is available to you if you're paying interest on a student loan for yourself, your spouse, or a dependent child.

Health Insurance Premiums

Health care is expensive, and only getting more expensive. Luckily, the IRS takes this into account. Deductible medical expenses have to exceed 10 percent of your adjusted gross income (AGI) to be claimed as an itemized deduction in 2019, but if this is true of you, you're looking at some major savings.

Social Security Tax By the Self-Employed

Every employed American has to pay into social security, including the self-employed, who are then eligible for a deduction on a portion of this tax. Usually, employers pay a portion of social security, but when you're self-employed you're paying the portion of the employer and the employee, which amounts to 12.4% on up to $128,400 of earnings.

Unusual Business Expenses

It may seem obvious that you can write off the cost of business expenses, but you may not know how many different kinds of business expenses that include. As Turbotax points out, "A junkyard owner, for example, might be able to deduct the cost of cat food that encourages stray cats to hang around and keep the mice and rats away. A bodybuilder got approved to deduct the body oil he used in competition."

Charitable Donations

While most taxpayers probably know that you can write off major charitable donations, many don't know that you can also write off smaller ones. Additionally, it's possible to write off expenses paid out of pocket that allowed you to spend time working for a charity, such as hiring a babysitter for your children so you can volunteer at a soup kitchen. Or, if you drove your car to charitable activities, you can deduct 14 cents per mile, plus parking and tolls paid.

Earned Income Tax Credit (EITC)

While a large portion of Americans qualify for the EITC, 25% of people don't claim it. This is actually a tax credit, ranging from $519 to $6,431 for 2018. You likely qualify for this credit if you're low income, or if you recently lost a job, took a pay cut, or worked fewer hours during the year.

Medical Costs

According to the affordable care act, taxpayers under 65 who accrue medical expenses greater than 10% of their annual income can earn a significant tax deduction. To reach this 10% threshold, you can tally up medical expenses that may not seem obvious, like transportation costs to and from the hospital.

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Tax Relief

Tax debt can become a major source of stress. Wouldn't it be great to just make one payment and have all your tax debt disappear?

With an offer in compromise (OIC), that's actually possible. Whether you have major debt, are just getting started in your career, or are in another situation that has made it difficult for you to pay your tax liabilities, an OIC might be a great option to help you get back on track.

Pirsch Law

What is an OIC?

The IRS's website describes an OIC as an: "agreement between a taxpayer and the Internal Revenue Service that settles a taxpayer's tax liabilities for less than the full amount owed." Essentially, if an individual simply cannot pay their debt to the IRS, there is little chance of them being able to pay in the near future, and they don't own any significant property, they can offer the IRS a percentage of the money they owe, and if the IRS accepts, the individual's debt is settled.

However, taxpayers who can pay the liabilities through an installments or other means, generally won't qualify for an OIC. For an individual to qualify for an OIC, the taxpayer must have filed all past tax returns, made all required estimated tax payments for the current year, and made all required federal tax deposits for the current quarter if the taxpayer is a business owner with employees.

Who Qualifies for an OIC?

While this might sound like a very appealing way to resolve your debt, there are important stipulations to keep in mind. The IRS isn't going to accept any amount of money in exchange for waving your debt and generally won't accept an OIC unless the amount proposed is at least equal to the reasonable collection potential (RCP). The RCP is the combined value of the taxpayer's assets, such as real estate, automobiles, bank accounts, and other property. The RCP also includes anticipated future income.

Additionally, there are three reasons that the IRS would accept an OIC.

  1. Doubt as to liability. This is when there is a credible reason to believe that an individual's tax debt does not actually exist or is not as high as the IRS believes.
  2. Doubt as to collectibility. This occurs when a taxpayer's income and combined assets don't add up to the full amount of the tax debt.
  3. Effective tax administration. This is when there's no doubt that the tax debt is owed and that the full amount can be collected, but that doing so would economically cripple the taxpayer irrevocably.
If you think you may qualify, you can visit the IRS's page on OICs to learn how to apply. While this debt solution may only work for some, it's important to know your options when dealing with debt of any kind.


On December 22, 2017, President Donald Trump signed the Tax Cuts and Jobs Act into law. Most of the new provisions go into effect on 2018's taxes. So you will file your 2017 taxes with little or no changes.

The new tax plan cuts the corporate tax rate from 35 percent to 21 percent beginning in 2018. Additionally, the top individual tax rate will drop to 37 percent. The law overall cuts income tax rates, doubles the standard deduction, and eliminates personal exemptions. The corporate tax cuts are permanent but the new individual rates will expire at the end of 2025.

Personal Income Rates

How does this all affect you? Here's a breakdown based on a rough estimate of your annual salary. Employees will first see changes in their February 2018 withholdings.

TheBalance.com

The Act keeps the same seven tax brackets for individuals. The 2017 rates will be reinstated in 2026 under this law. The new plan helps higher income families the most in terms of receiving the biggest tax cuts. The Tax Foundation has said that those in the 20 to 80 percent income range would receive a 1.7 percent increase in after-tax income. Meanwhile, people in the 95 to 99 percent range would receive a 2.2 percent increase.

Business Rates

The Act has more changes for business than it does for individuals. The new corporate tax rate at 21 percent is the lowest since 1939. The United States has one of the highest business tax rates in the world, but most corporations don't pay that much. The effective rate, when you take into account deductions and loopholes, is only around 18 percent.

The Act also raises the standard deduction for pass-through businesses to 20 percent. This deduction will also expire in 2026. A pass-through business includes sole proprietorships, partnerships, limited liability companies, and S corporations. This classification also includes real estate companies, hedge funds, and private equity funds. The deductions go away for service professionals when their income reaches $157,500 for singles and $315,000 for joint filers.

Another feature of the Act will allow companies to repatriate the $2.6 trillion they collectively hold in foreign cash stockpiles. They will pay a one-time tax rate of 15.5 percent on cash and 8 percent on equipment. Most famously, Apple holds $252 billion in foreign cash. This new tax rate will allow the company to bring it back to the US without a substantial tax hit. A similar “tax holiday" in 2004 provided little boost to the economy, according to the Congressional Research Service. The repatriated cash was distributed to shareholders over employees.

Changes To Deductions

The standard deduction for individuals has been doubled. Meaning, you can claim many more deductions that you could in the past. A single filer's deduction increased from $6,350 to $12,000. Married and joint-filer deductions increased from $12,700 to $24,000. These will also revert back to the 2017 level in 2026.

The Act also eliminates personal exemptions and most itemized deductions. This usually includes moving expenses, except for members of the military. Someone paying alimony can no longer deduct the payments, but those receiving them can. Deductions for charitable contributions, retirement savings, and student loan interest remain unchanged. But you can't take these as well as the standard deduction. The new law limits deductions on mortgage interest to the first $750,000 of the loan. Taxpayers can also deduct up to $10,000 in state and local taxes, but must choose between property taxes and income or sales taxes. The Act repeals the Obamacare tax for people without insurance in 2019.