Five Tax Deductions You Can’t Miss
With the April 15 tax filing deadline right around the corner, you want to make sure you take advantage of every possible deduction. Andy Phillips , director of the H&R Block Tax Institute, says that with the deadline fast approaching, his tax experts are getting a lot of questions from filers looking to maximize all the deductions available to them. From benefits for contract workers (like the home office deduction) to pension contributions, here are a few tax deductions that tax filers may be missing out on.
Don’t Miss These Tax Deductions
Retirement Contributions and Traditional IRA Contributions
Phillips says that if you contribute to a traditional tax-advantaged retirement account (IRA, 401(k), etc.), you may owe less in taxes than if you didn’t contribute. With a 401(k), you may not even realize you’re getting an exclusion if your contribution is automatically deposited with your paycheck. The money comes in pre-tax, reducing your taxable income.
By using a traditional IRA, you can still get a tax deduction without requiring access to an employer plan. However, your tax benefits may be limited if you also participate in an employer plan. For self-employed taxpayers, SEP IRA and SIMPLE (Employee Savings Incentive Plan) IRA contributions are “above the line” tax deductions. See other deductions for self-employed people below.
Self-employment expenses
As side hustles become more popular, it’s no surprise that self-employment expenses are becoming more common. For example, if you pay for your own qualified health insurance, this may be considered an “above the line” deduction. Additionally, you can deduct half of your self-employment taxes above the limit.
In addition, Phillips reminds filers that you can deduct business expenses such as internet costs, office supplies, advertising and business travel from your business income. And for eligible individuals, you can take a home office deduction.
Student loan interest
Phillips reminds applicants with student loan debt that you can deduct some or all of the interest you paid this year on the qualifying student loan. In fact, federal student loan borrowers may be eligible to deduct up to $2,500 in student loan interest on each tax return for the tax year. You can claim a tax deduction for student loan interest as an adjustment to income. You don’t need to itemize deductions to qualify.
Charitable contributions
You will need to itemize your deductions if you want to deduct your charitable donations. “Many people find it worth itemizing these deductions,” says Phillips, “especially if you regularly give to a church or other charity.”
You can also deduct the current fair market value of the items you donate to charity. Be sure to get a receipt for donations, whether cash or goods. And don’t forget to track your mileage if you’re driving on behalf of a charity; this is also tax free.
Are your children even newborns?
You can claim all qualified children born or adopted during the tax year in which you file your return. Even if your child was born on December 31st, your child may be claimed as a dependent on your taxes. However, Phillips clarifies that if your child was born after December 31, even if your pregnancy lasted most of the tax year, you will have to wait until you file your return for the following year to claim it.
To qualify, a child must:
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Be related to you as your child, stepchild, brother, sister, stepbrother, stepbrother or descendant of any of them;
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Be under 19 years of age, be a full-time student under the age of 24, or have a permanent and permanent disability;
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Do not provide more than half of the total child support; And
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Having lived with you for more than six months, they were alive.
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Do not file a joint return with your spouse unless you are seeking a refund of income taxes withheld or estimated payments.
If you are a dependent and earning an income, the good news is that your parents can still claim you as a dependent as long as other dependent rules apply. Your earned income is not refunded. Filing tax returns for children is simple in this regard. However, you may have to report this on your tax return.
What cannot be deducted from taxes?
While you’re looking for every possible deduction, you’ll run into a few obstacles.
Commuting expenses
Unfortunately, commuting expenses are not tax deductible. Commuting expenses between your home and your primary place of work, no matter how far, are not an allowable deduction.
The cost of driving from home to work and back is a personal commuting expense. This also applies to the fares you pay to travel to and from work on any form of public transport.
Phillips notes that if you are a member of a reserve component of the Armed Forces and travel more than 100 miles from home in connection with your service as a member of the reserves, you can deduct your qualified travel expenses.
Your cat’s veterinary bills
Unfortunately, deducting medical expenses for pets is not allowed as a medical expense on your tax return. Phillips says the only exception would be if the animal is a certified service animal, such as a guide dog, to help you. However, service animals are not generally considered pets.
If you have a hearing or vision disability, you can deduct medical expenses for your pets if they are certified service animals. Expenses that may be covered include purchasing, training and maintaining the animal, including food, care and medical care.
Be sure to keep accurate records and consult a tax professional if you have any questions or concerns. By taking advantage of these deductions, you can potentially reduce your tax liability and keep more of your hard-earned money.