10 Surprising Tax Deductions You Might Be Able to Take

By Markets Fool.com

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When tax time rolls around, it's easy to feel resentful about how much money you're sending to Uncle Sam. (True, we do get schools and roads and police and soldiers and food safety regulations for our money, but we often overlook such things.) Fortunately, though, you might not have to pay quite as much as you think. There are many deductions that most people are unaware of. If some apply to you, you might shrink your tax bill significantly.

Here are 10 often overlooked tax deductions that might surprise you:

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Moving expenses

Yup, your moving expenses, such as the cost of hiring a moving company or renting a truck, may be deductible -- if you're moving in order to take a new job or because your job changed locations. There are some rules to qualify, though, of course. For one thing, your new job location must be at least 50 miles further away from your old home than your old job was. You also must move no earlier than a year before starting to work in the new location, and you must remain working in that location full-time for at least 39 weeks during the first year after you moved. (Whew!) Even better, this deduction is one you can take without even itemizing your deductions. (You'll need to use IRS Form 3903.)

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Job-hunting expenses

You may be able to deduct a lot of job-search costs if you're looking for a job in the same field that you currently work in and you're also not embarking on your first career. The expenses are part of your "miscellaneous expenses," which sport a 2% threshold. If all your miscellaneous expenses total, say, $1,500, only the portion of them that exceed 2% of your adjusted gross income (AGI) can be deducted. If your AGI is $60,000, 2% is $1,200, leaving you with a $300 deduction. The kinds of expenses that qualify include transportation to and from interviews, the cost of printing resumes and mailing them out, and food and lodging costs if your search has you staying overnight somewhere. The cost of your nice new suit doesn't qualify, though, and neither does the cost of the course you took in order to be a more competitive candidate. (Educational expenses may qualify for other deductions or credits, though.) Note, too, that you don't even have to have landed the job for the search costs to be deductible.

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Health insurance premiums

Many people -- but not all -- can deduct the premiums they pay for their health insurance. You will need to be itemizing your deductions, though, and when it comes to deducting medical expenses, you can only deduct the portion of qualifying expenses that exceed 10% of your adjusted gross income (AGI). (For 2016, it's just 7.5% if you or your spouse is 65 or older.) Furthermore, if your employer provides health insurance for you and pays part of your premium, you can't deduct the portion paid by your employer. Your own portion may also not be deductible if it is paid via pre-taxdollars (i.e., deducted from your paycheck on a pre-tax basis). It's even better for the self-employed, as they don't have to meet the 10% threshold and don't even have to itemize. If you're self-employed and are reporting a profit for the year, you may be ableto deduct your health insurance premiums as well as premiums for qualifying long-term care policies, for yourself, your spouse, and dependents. Learn more in IRS Publication 535.

Medical expenses

When you think of deductible medical expenses, you might think of expensessuch as prescription drugs, but many health-related expenses can qualify -- including, for example, programs or products to help you quit smoking, breast pumps and lactation supplies, and even modifications to a house to make it more accessible for a person with disabilities. Some taxpayers have successfully made the case for deducting the cost of clarinet lessons that served to treat a dental condition, wigs to cover hair loss from chemotherapy, and weight-loss programs to treat obesity. Consult a tax advisor or read up on this deduction if you're not sure whether some of your expenses qualify.

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Mortgage points paid

Most people know all about the deductibility of mortgage interest, but many don't realize that points paid can be deductible, too. When securing a mortgage (including when you refinance), you are often able to pay one or more "points" in order to lower your interest rate. A point is equal to one percent of your loan. So if you have a $200,000 mortgage, paying a point would cost you $2,000. There are rules here, too, of course. For example, the mortgage must be for your primary home, the points you paid must not seem excessive, and they must be clearly itemized on your mortgage statement. You can look up the rest of the rulesin IRS Publication 936.

Sales taxes paid

You may know that you can deduct the state income taxes you pay, but you may not realize that you are allowed, alternatively, to deduct the state and local sales taxes you paid during the year instead. So do your own math. If you pay significant state income taxes, that's probably your better option. But if your state imposes no income tax, or you made an especially big purchase during the year, the sale-tax option might be more beneficial.

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Gambling losses

Yup, if you lose at the casino, that cloud might have a silver lining. You can deductgambling losses, but only if you itemize your deductions and you've kept good records of all your winnings and losses. Also, you can't deduct more in losses than you won. So if your winnings totaled $3,000 and you lost $5,000, you can only deduct $3,000. (The remaining $2,000 can be carried forward to the next year.)

Home office expenses

Among the home office expenses that you may be able to deduct are some, beyond utilities, insurance, and property taxes, that you might not have expected -- such as maintenance and repairs. If you pay $10,000 for a new roof for your house and your home office takes up 10% of your house, you may be able to deduct $1,000. If you have to rewire or repaint just your home office, you may be able to deduct the entire cost of that.

Job-related expenses

That miscellaneous category also includes expenses such as uniforms or work clothes that you buy for your job that you can't wear elsewhere, union dues, dues to professional organizations, work-related education costs (such as the cost to secure a professional certification), and so on.

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Financial expenses

If you spend money for the services of a tax consultant or financial planner or you pay someone to prepare your taxes, such expenses may be deductible as miscellaneous deductions. Remember that your miscellaneous expenses that qualify are deductible to the extent that they exceed 2% of your AGI. Other financial expenses in this category would include tax-preparation software, subscriptions to investment services or periodicals, and other financial research materials. There are some other investment-related expenses that you can deduct elsewhere on your return. For example, if you invest using margin (i.e. with funds borrowed from your broker), you can deduct the interest you pay as investment interest. And when you pay your brokerage a commission each time you buy or sell stock, you can deduct that commission expenses from your gains. To clarify, imagine buying $1,000 worth of stock and paying a $10 commission to do so -- and then selling that stock sometime later for $1,500, paying another $10 commission. Your taxable capital gain doesn't have to be $500, because you can add $10 to your cost basis (making it $1,010) and subtract $10 from your sale proceeds (making them $1,490), which reduces your gain to $480 ($1,490 less $1,010). That might not seem meaningful, but it is if you do a lot of trading.

Why tax deductions are useful

Finally, it's important to understand why you want tax deductions in the first place. A tax deduction lets you reduce your taxable income. Have taxable income of $75,000 and $5,000 in deductions you can take? Your taxable income is now $70,000. If you're in the 25% tax bracket, you avoid being taxed on that $5,000 and save $1,250.

Looking for deductions is definitely worth the effort. By using the deductions listed above, you might be able to shave a meaningful sum off of your tax bill.

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Longtime Fool specialistSelena Maranjian, whom you can follow on Twitter, owns no shares of any company mentioned in this article.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.