Tax Deductions and Credits You Might Be Missing Out On

Tax season can be daunting for many individuals and businesses alike. However, buried within the complexities of the tax code are numerous opportunities for savings through deductions and credits. While some are well-known and commonly claimed, others are often overlooked.       

Understanding these tax breaks can potentially lead to significant savings. This article will explore some often missed deductions and credits you might overlook.

1. Education-Related Deductions and Credits

Education costs can be substantial but also come with potential tax benefits. Many people are aware of popular credits like the American Opportunity Tax Credit and the Lifetime Learning Credit, but there are other deductions and credits worth considering:

• Student Loan Interest Deduction: If you’re paying off student loans, you may be eligible to deduct up to $2,500 of the interest paid on those loans, subject to income limitations.
• Tuition and Fee Deduction: Even if you don’t qualify for education credits, you might still be able to deduct tuition and fees for yourself, your spouse, or your dependents.

2. Home Office Deduction

With the rise of remote work, more people are working from home than ever. Yet, many fail to take advantage of the home office deduction. If you use a portion of your home regularly and exclusively for business purposes, you may be eligible to deduct related expenses such as utilities, insurance, and even a portion of your rent or mortgage interest.

3. Health Savings Account (HSA) Contributions

Contributions to an HSA offer a unique tax advantage. Not only are contributions tax-deductible, but withdrawals used for qualified medical expenses are tax-free. If you have an HSA-eligible health insurance plan, consider maximizing your contributions to take advantage of these tax benefits.

4. Charitable Contributions

While many people remember to deduct cash donations to charities, other charitable contributions often go unclaimed. These may include:

• Non-Cash Donations: Donations of clothing, household items, and even vehicles can be deducted at fair market value.
• Mileage: If you use your vehicle for charitable purposes, such as driving to volunteer at a nonprofit organization, you can deduct the mileage (currently set at $0.14 per mile).

5. Job Search Expenses

If you’re looking for a new job, you might be able to deduct related expenses, such as resume preparation, travel costs for interviews, and job placement agency fees, provided they exceed 2% of your adjusted gross income.

6. Energy-Efficient Home Improvements

Making energy-efficient upgrades to your home can save you money on utilities and earn you tax credits. Installing items like solar panels, energy-efficient windows, doors, and insulation may qualify you for the Residential Renewable Energy Tax Credit or the Nonbusiness Energy Property Credit.

7. Adoption Expenses

Adopting a child can be financially burdensome, but there are tax benefits available to help offset some of the costs. Qualifying adoption expenses, including adoption fees, attorney fees, and travel expenses, may be eligible for a tax credit.

8. Dependent Care Assistance

If you pay for childcare or dependent care expenses so that you can work or look for work, you may qualify for the Child and Dependent Care Credit. This credit can help alleviate some of the financial strain of childcare costs.

9. Job-Related Moving Expenses

While the deduction for moving expenses was eliminated for most taxpayers in 2018, members of the military and certain others may still be eligible to claim this deduction. If you moved due to a change in your job location or starting a new job, be sure to explore whether you qualify for this deduction.

Conclusion

Navigating the maze of tax deductions and credits can be overwhelming, but taking the time to familiarize yourself with the available options can result in significant savings. Numerous opportunities exist to reduce your tax bill, from education expenses to charitable contributions to home improvements. 

As tax laws are subject to change and individual circumstances vary, you should consult a tax professional to ensure you maximize your tax savings while staying compliant with the law. By staying informed and proactive, you can unlock valuable tax deductions and credits you might miss out on.