There are only two things that are certain in life and only one requires a coffin. Of death and taxes, death is definitely worse. Pay your taxes, but don’t overpay your taxes. Here are some tax deductions that you may overlook when you are your own accountant:
For medical expenses that insurance didn’t cover throughout the year, you can deduct the amount the exceeds 7.5% of your adjusted gross income. There’s some talk of changing this amount, so be sure to check in with the new tax laws before you file for this deduction.
Childcare and eldercare
The Child and Dependent Care Credit is actually a tax credit, so it’s even more valuable than a tax deduction. It’s available to parents and legal guardians of children under the age of 12 who require childcare so their parents can work or attend college. The tax credit also covers fees for camps if the child goes because the parent needs to work.
If you are financially responsible for paying for the care of an elderly loved one who you also claim as a dependent on your taxes, you may be able to claim those costs under this tax credit, as well.
Each household can take up to a $4,000 tax deduction for tuition fees paid throughout the year. This applies to college tuition, and in some cases you can claim tuition for Kindergarten through 12th-grade tuition, as well.
Student loan interest
For households that make less than $80,000 per year, student loan interest can amount to a hefty tax deduction. You can get an official statement from your student loan company.
Moving expenses when you relocate for your first job
The great thing about this deduction is that you don’t have to itemize your taxes to claim it. If you had to relocate to start your first job, those expenses are deductible if you moved more than 50 miles from your previous address.
Earned Income Tax Credit (EITC)
This tax credit could be worth $6,318. It isn’t just for people with kids. Before you file your taxes, find out if you qualify. This is one area where it may be helpful to ask for professional assistance with your tax preparation.
Mortgage taxes and interest
For new homeowners, the interest on their mortgage and property taxes add up to a nice deduction. In fact, it’s a well-known perk of becoming a homeowner. You can get an official document from your lender to find out exactly how much interest you’ve paid over the course of the year on your mortgage.
For the self-employed or those that make money in the gig economy, there are many tax breaks
If you make money with a side hustle, a bit of freelancing, or as a consultant part-time, you may be subject to income taxes as a self-employed person. The good news is that there are many tax deductions that you can take to reduce the amount of your hard-earned money that will go to the government.
- Mileage at 54.5 cents per mile for business-related travel in your vehicle
- Office supplies
- Office equipment
- 50% of your employment tax payment
- Home office deduction
- Contributions to a retirement plan
- Depreciation of capital expenses that have a lifespan of more than one year
- Professional educational expenses
- Cell phone, data, and Internet services that are crucial for your business
- Promotional expenses like business cards and advertising
- Bank fees on your business account
- Interest charges related to the business
- Money spent to pay contract laborers that assist you with your business
While it’s easy to handle your taxes on your own with tax software and online programs, if you decide to itemize your deductions, you may want to hire an expert to help.
Since the Tax Cuts and Jobs Act, there have been so many changes to the tax laws that it’s difficult to keep up. This is one area where it pays to have a professional in your corner.
A tax professional can help you identify expenses you may not have thought of that could lower your tax bill. Since the recent tax reforms, many people who used to itemize may be better off taking the now-higher standard deduction. A tax preparer can help you run the numbers both ways to see which would be more beneficial.
If you realize you’ve overlooked an important tax deduction, take a close look at your last three years of tax returns. You can refile and claim deductions for those years, as well. This could mean thousands of dollars in savings on your tax bill.