Tax filing season is coming to a close, and if you're doing a last minute scramble or managed to get an extension, you're probably looking for ways to reduce the amount that Uncle Sam takes out of your pocket. Taking deductions is the simplest way to reduce your tax liability, but be warned that the Internal Revenue Service (IRS) doesn't allow taxpayers to write off just anything.
Here are a few deductions that you don't want to try out:
- Commuting costs – This may come as a surprise to you, especially since some employers allow pretax dollars to be spent on public transit passes and parking, but the IRS considers commuting to be a personal expense. You may, however, be able to write off some travel costs like driving to meet a client or go to a different office on the same day.
- Homeowners insurance – While home insurance does provide peace of mind, it does not offer a tax break. There is an exception to this rule if your primary residence also doubles as your place place of business. In that case, you may also able to deduct the cost of private mortgage insurance, utilities and repairs.
- Pets – Yes, this has been claimed by many people who went on to pay plenty of fines to the government. No matter how much money you spend on Fido's vet bills and grooming, the IRS will not consider any domesticated animal a dependent.
- Primary telephone line – Even if you use your telephone line primarily for business, this cost is not tax deductible if you only have one phone line in your house. You can, however, deduct the expenses of business-related long-distance phone calls.
With so many restrictions placed on hard-working taxpayers, it's a wonder how anyone can save for retirement. It's possible, though, when you pursue alternative wealth preservation strategies.