13 Money-Saving Tax Deductions You Might Have Missed
Tax season is already here. That means it’s now the perfect time to get organized and find new ways to save money. Make sure you are aware of all the deductions and tax credits available to you, otherwise you’ll risk missing out on hard earned cash. Here, we’ve listed 13 commonly missed tax deductions that could potentially save you hundreds or thousands of dollars on your state or federal tax return.
1. Sales and Income Tax
Lots of filers forget to include state sales and income taxes as a deduction on their tax returns. Don’t make the same mistake. Instead, if you live in a state that doesn’t impose an income tax, add up all the tax you’ve paid on personal and household items to get a saving. However, if your state does have an income tax, the best way to save money is to claim it as a deduction on your tax forms, unless you made various large purchases like cars. To get the best saving, you need to consider the amount of sales tax your state charges.
2. Medical Expenses
It’s possible to deduct some of your yearly medical and dental expenses if you itemize your deductions on your tax return. You can deduct non-reimbursed medical expenses that exceed 10% of your salary. However, over the counter medicine, toothpaste, toiletries, funeral and burial expenses are not deductible.
3. Charitable Donations
Even though charitable donations are quite a common federal tax deduction, lots of taxpayers believe that they can only claim deductions on large donations. But, if you’ve covered the cost of postage, made cookies for fundraisers or donated clothes, for example, make sure you have your receipts when you prepare your taxes.
If your receipts add up to more than $250, you can deduct the amount if you have documentation from a non-profit. Also, if you gave lifts or did other driving for a charity, you can claim back $0.14 per mile.
4. Child and Dependent Care Credit
If you spend money on child care, it’s possible to claim back a substantial tax credit. You can deduct up to $3,000 for one or dependent, or up to $6,000 for two or more. If you receive childcare reimbursement through your job, you can still save a ton. Make sure you keep all invoices and billing statements for childcare, as well as records showing bank statements or credit card bills.
5. Student Loan Interest
Parents with dependents who have student loan debt can deduct any interest they paid on their child’s loans during the school year. If you are paying your own student loan, you should receive Form 1098-T from the student loans company, showing the amount of interest you paid. Then, you can deduct this amount from your tax return.
The number of interest you can deduct is capped at $2,500 for each year. However, if you’ve paid off your college education by earning a significantly large salary, your deduction might be limited or even non-existent.
6. College Tuition and Training
If you are still in school or take classes to improve your skills, you might be eligible for the Lifetime Learning credit. It’s another useful tax credit that allows you up to $2,000 in the form of a tax credit. To qualify for this tax credit, your salary must not exceed a certain limit. To get this credit, you’ll need to file Form 8863.
7. Job Search and Moving Expenses
If you had to find a new job during 2017, you can deduct job searching costs on your tax return. Eligible costs include travel to and from interviews, and you’ll be able to claim up to 2% of your AGI. However, you can only claim this deduction if your job search was in the same field, and it wasn’t your first job.
8. Energy-Saving Home Improvements
By making your home more energy efficient you can get the Residential Energy Efficient Property tax credit. If you’ve installed alternative energy equipment in your home within the past year, you can get a 30% reimbursement for the cost of installation. Qualifying equipment includes solar hot water heaters, wind turbines, and solar electric.
9. Military Reserve Travel
Members of the National Guard and military reservists are eligible to deduct partial travel expenses from their tax returns. The deductions include travel expenses for attending meetings or drills more than 100 miles from home, even if you don’t itemize. This includes lodging expenses and half of your meal costs. Finally, the 2% AGI limit does not apply.
10. Self-Employment Tax Deductions
Those who are self-employed don’t get a W-4, so they aren’t able to use certain payroll tax deductions. But, they can use the same small business tax deductions from 2016 instead. Self-employed fliers can claim part of their mortgage or rental expenses, utility costs, maintenance and other expenses as tax deductions.
11. Reinvested Dividends
Lots of investors choose to automatically reinvest mutual fund dividends. However, it’s easy to forget that these dividends are taxed when paid and that reinvesting is actually the same as buying new shares. If you’re an investor, make sure that your dividend reinvestment is reflected in the cost-basis of your shares. Don’t forget to deduct the service charge from your reinvested dividends when you file your tax return.
12. Earned Income Credit
If you earn a lower income, you might be eligible for the Earned Income Tax Credit. Often, this credit is overlooked because you must file a tax return to claim the credit even if you don’t owe taxes or have any taxable income for the year.
13. Mortgage Interest Remodeling
The biggest tax deduction for homeowners is mortgage interest. But, did you know that there are other homeowner deductions that you can take advantage of? If you itemize, taxpayers who have remolded their current home can deduct state sales tax for building materials. In addition, individuals or couples who bought a house during the tax year can claim back interest paid on their mortgage points. This also may apply to homeowners who have refinanced their mortgage.
