Tax season is here, and most of us scramble to get our financial ducks in a row. It is no secret that knowing and utilizing tax deductions can cut your taxable income down a notch, saving lots of money in the process. However, numerous taxpayers miss several valuable tax deductions simply because they are unaware these exist. Below are the top 10 tax deductions you may need to pay attention to so you will know you are not leaving any money on the table. Remember, it is always good to consult with a tax professional to claim everything you are entitled to legally and effectively.
1. Medical and Dental Expenses
Were you aware that you may be entitled to an unreimbursed deduction for your medical and dental expenses? You can deduct them if your AGI costs are over 7.5%. Examples include payments to doctors, dentists, surgeons, prescription medications, medical equipment, and even some travel expenses related to medical care. Remember to add in the premiums you pay for any long-term care insurance; every little bit counts.
2. State and Local Taxes (SALT)
The SALT deduction is one of the more underutilized tax deductions. You can deduct up to $10,000 combined property, income, and sales taxes. If you’re married and filing separately, that number drops to $5,000. This can be a huge benefit if you happen to live in a state with high income or property taxes. Because the deduction has a limit, it’s worth your time to figure out which taxes are most advantageous to deduct.
3. Mortgage Interest
If you’re a homeowner, remember to deduct your mortgage interest. You are able to deduct interest on mortgage loans up to $750,000 if the mortgages were taken out after December 15, 2017 ($375,000 if married filing separately). This covers interest paid on loans to buy, build, or improve your primary or second home. The premiums for mortgage insurance can also be deducted, further adding to your savings.
4. Charitable Contributions
Giving to charity feels good, and it also gives you an advantage if you itemize deductions: up to 60 percent of your adjusted gross income. Non-cash contributions such as clothing and household goods donated to qualified organizations may also be valued and deducted. Remember to save all your receipts and documentation for any charitable donation. If you think you have value items, consider having them appraised to maximize your deduction.
5. Education Expenses: Interest on Student Loans and Tuition Fees
Paying off student loans? You can deduct up to $2,500 in student loan interest, depending on your income. If you’re taking courses to improve your skills or to keep your existing job, you can also look into the Lifetime Learning Credit or the American Opportunity Tax Credit. Both of these credits are dollar-for-dollar offsets against your total amount of tax due and often fall through the cracks for many students.
6. Retirement Contributions
Saving for retirement is a smart financial move and an excellent way to lower your taxable income. The money you put into a traditional IRA or into a 401(k) plan can be subtracted from your income. For 2024, you can contribute up to $6,500 into an IRA-or $7,500 if you’re turning 50 or older, up to $22,500 into a 401(k)-or $30,000 if you’re turning 50 or older. If you’re self-employed, options like a SEP IRA or a solo 401(k) might allow you to deduct even more.
7. Home Office Deduction
You may be entitled to take advantage of the home office deduction if you work from home. You can claim the home office deduction for part of your residence, which you use regularly and exclusively for business. Whether you lease or own your residence, you can deduct a portion of your mortgage interest, utilities, rent, insurance, repairs, and even depreciation. Ensure the space is used consistently and only for business since the IRS audits home office deductions.
8. Job Search Expenses
Looking for a job in your present occupation? You can deduct some of your job search expenses, such as the cost of preparing your resume, traveling to job interviews, and paying for the services of an employment agency. These are subject to a 2% AGI limit, so keep records of all such expenses. Remember that your costs are deductible only if the new job is in the same line of work as your old one.
9. Unreimbursed Employee Expenses
If you have work-related expenses that were unreimbursed by your employer, you can deduct them. The things that may qualify for this include tools, uniforms, union dues, and work-related travel expenses. However, you must have these expenses over 2% of your AGI, and they require itemizing deductions. Note that, under changes in tax law, most taxpayers won’t be able to claim these deductions from 2018 to 2025, though there may be an exception for certain professions, such as educators or performing artists.
10. Energy-Efficient Home Improvements
Have you made any energy-efficient improvements to your home recently? You may be entitled to some tax credits! The Residential Energy Efficient Property Credit will let you claim 30% of the cost of installing solar, wind, geothermal, and fuel cell technology. Other energy-saving improvements, such as new windows and doors or insulation, might qualify for credits. Remember to keep your receipts and certification documentation on hand to support your claims.
Remember, every bit you save adds up, and being proactive with your taxes can lead to significant savings. Happy tax filing!
