Tax deductions even the professionals miss

Here are the six itemized deductions that people tend to miss most, from relocation expenses to summer camps.

After you’ve itemized deductions on your income tax for a few years, you get to know the drill. You track charitable contributions — even the little ones — and know what unreimbursed work-related expenses are legit. But even experienced itemizers miss things. We called leading tax preparers to find out what people tend to miss most. Here are their contenders for most-overlooked deduction or tax credit.
RELOCATION EXPENSES — EVEN IF YOUR COMPANY PAYS
No, you can’t double-dip, but if you get a new job that entails relocation at least 50 miles from your last job, you have deduction options. Say your employer covers $5,000, and it costs you $10,000 to move: You can deduct the $5,000 that came out of your pocket for the movers, storage units, mileage on your car and so on, says Jackie Perlman, principal tax research analyst at H&R Block’s Tax Institute.
You take the deduction the year you start your new job, though you have to work full-time for at least 39 weeks to claim the deduction. But if you start in, say, December, 2014, you still claim the exemption for 2014. You just have to expect to stay for 39 weeks into the following year. If you don’t make it that long, you can amend your return to remove the deduction — or include the amount you deducted in the next tax year’s income.
PERSONAL LOANS GONE BAD
You’re a good friend. So when your friend needed money a few years ago to pay the rent, you helped. Hopefully you scribbled out a note saying that the loan was for, say, a total of $6,500, and whether you charged interest. Now your friend can’t pay you back. You’ve done everything possible to try and collect, to no avail. You can deduct up to $3,000 of the loan, and the remainder can be deducted in future tax years, says Lisa Greene-Lewis, a CPA and TurboTax blog editor. If you do this year after year, however, the IRS might question your unflinching generosity and wonder if you’re simply making gifts.
GOING BACK TO SCHOOL
This one’s actually a tax credit, which is better than a deduction because it lowers your taxes dollar for dollar. The Lifetime Learning Credit allows someone who decides to go to graduate school — or just take a few courses — to claim 20% of the first $10,000 of tuition, fees, books and supplies. The cap is $2,000. There are income limits, though. For single and head of household filers, the credit gets phased out over an income range stretching from $54,000 to $64,000 (and from $108,000 to $128,000 for joint filers). There’s no limit on how many years the credit can be taken, says David Prokupek, chief executive officer of Jackson Hewitt Tax Service.
SUMMER CAMP
If you needed to put a child in day camp so you can work or look for work, you can take a maximum credit of $1,050 for one child and up to a maximum $2,100 for two or more. Depending on your income, the percentage of the expense you can take ranges from 20% to 35%. The $2,100 figure, for example, is 35% of the $6,000 maximum allowed for child-care expenses, says Ms. Greene-Lewis. Even sports camps are covered. For a married couple, both spouses have to be working, or one working and one looking for work.
TRAVELING FOR MEDICAL TREATMENT
Say you live in Manhattan, and your doctor says you need to get a particular medical treatment at the Mayo Clinic in Minnesota. Your airfare may be deductible, says Mark Jaeger, Individual Tax Team Lead at TaxACT. The treatment has to be prescribed by a doctor and be essential, such as a cancer treatment. The IRS also allows you to deduct up to $50 per night for lodging per person, which makes it $100 when, say, a parent accompanies a child. If you drive, you can deduct either the actual expenses for gas and the like or you can use the standard mileage rate of 23.5¢ a mile.
THE RESIDENTIAL ENERGY PROPERTY CREDIT
If you’ve already done a big energy project at home, such as adding solar panels or geothermal heating, you probably know you can deduct 30% of the cost of the improvement, with no limit. But if you’ve been thinking about doing a big project along these lines and have been putting it off, you may not realize that 2016 will be the last year this credit is available. You can get details on the government’s Energy Star website.