9 Tax Deductions You Might Be Missing This Year

Additional Coverage:

9 Tax Deductions Middle-Class Americans Miss Every Year (financebuzz.com)

Uncovering Hidden Tax Savings: Beyond the Standard Deduction

Many Americans instinctively opt for the standard deduction to reduce their taxable income, but for some, a closer look at itemizing could unlock significant savings. Depending on your individual financial situation, exploring lesser-known, legitimate deductions might be the savviest move.

Here are some key deductions you should consider this tax season if they apply to your circumstances:

1. Home Office Deduction for Renters

Think a home office deduction is only for homeowners? Think again!

If you use a specific and exclusive portion of your rented home for work, you may be able to claim certain housing expenses. While homeowners can write off mortgage interest and depreciation, renters can deduct portions of their rent, utilities, or other related costs.

This even extends to mobile homes or boats, provided they (or parts of them) are used solely for your business.

2. State and Local Taxes (SALT)

For those residing in areas with higher regional taxes, federal tax returns can offer some relief. State property tax, income tax, and sales tax can all contribute to this deduction.

While a $10,000 cap was imposed in 2018, this tax year sees a cap of $40,400 for families earning $505,000 or less. Those with higher incomes will see a phased-out cap, returning to $10,000.

3. Medical Travel Expenses

Do your medical appointments involve a lot of travel and expense? Costs like mileage, bus fares, tolls, and parking can all be deducted.

However, these deductions only apply if the total costs exceed 7.5% of your adjusted gross income (AGI) for the tax year. These deductions also extend to medical expenses incurred for a minor child or dependent.

4. Dental Expenses

The cost of dental work can add up, and if it’s medically necessary, you might benefit from deducting qualifying dental expenses. Similar to medical expenses, you can deduct dental costs for yourself, your spouse, and your dependents.

This includes artificial teeth, treatments for dental diseases like gingivitis, fluoride treatments, and regular dental care. Be aware, though, that optional treatments such as teeth whitening are not tax-deductible.

5. Educator Expenses

Teachers often dip into their own pockets to furnish classrooms. If your school hasn’t reimbursed you, you can deduct up to $300 in qualifying expenses this year. Note that teachers of physical education and health courses can only deduct athletics-related classroom expenses.

6. Military Moving Costs

Are you an active-duty member of the armed forces? If a military order for a permanent change of station required you to move this tax year, you can deduct any unreimbursed costs associated with that move, including the cost of transporting personal items and household goods. Lodging expenses, such as motel stays during your cross-country journey to a new station, may also be deductible.

7. Higher Education Costs

The American Opportunity Tax Credit (AOTC) can significantly reduce costs for students pursuing higher education. To qualify, your school must be eligible for participation in the student aid program supported by the U.S.

Department of Education. You can include the cost of required textbooks and supplies, as well as fees for mandatory student activities.

However, education-related insurance, room and board, or transportation costs are not deductible.

8. Student Loan Interest

Many former students automate their loan payments, often overlooking the breakdown between principal and interest. If you paid up to $2,500 in student loan interest this year, you can deduct that amount from your taxes. It’s worth a close look at your payment statements to see if you qualify for this deduction.

9. Charitable Contributions Beyond Cash

Donating to charities isn’t always about writing a check. You might travel as a chaperone for a nonprofit youth group, host a foreign exchange student, or purchase and clean a uniform required for volunteering.

These non-cash contributions can be counted toward your itemized deductions. However, meticulous tracking of these expenses and verification that the organization is a qualified charity are crucial.

The Bottom Line

Proactive financial habits, such as saving receipts throughout the year, understanding relevant tax deductions, and working with an accountant for timely and accurate filing, are excellent ways to improve your financial standing. If you’re seeking further strategies to minimize your tax burden, a CPA or other tax professional can review your financial documents and provide personalized recommendations tailored to your specific situation.

Money Tips for Everyone

Regardless of your current bank account balance, there are always opportunities to enhance your finances and boost your wealth. Here’s a quick guide to get you started today:

Boost Your Income: If bills are tight, consider exploring side hustles that complement a full-time job, or investigate other legitimate ways to keep more cash in your wallet.
Cultivate Your Wealth: Time and compound interest are powerful tools for wealth growth.

Begin by understanding your current financial position to create an effective action plan. Working with a professional can be a smart move if early retirement is a goal.

Seize Opportunities: Maximize your benefits by taking advantage of all available deals, discounts, and money-saving opportunities. For car owners, ensuring you have the best price on car insurance could save you hundreds.

Conversely, be vigilant about avoiding money-wasting traps that can silently drain your bank account.