With the tax filing deadline about 3 months away, now is a good time to start thinking about money you shelled out for tax-deductible expenses last year. Start gathering your receipts in order to make an impact on your taxes by increasing your tax refund or lowering the amount of taxes you owe.
If you haven’t started filing your taxes yet don’t worry. You can start today with TurboTax, and TurboTax will ask you simple questions and give you the tax deductions and credits you’re eligible for based on your answers and tax situation. You can also fully hand your taxes over to a TurboTax Live tax expert who is also available in English and Spanish, year round, and prepare your taxes from start to finish in one meeting.
Although TurboTax will give you the tax deductions and credits you’re eligible for, here are 10 money-saving tax deductions (and credits) to keep in mind when you start gathering your receipts for tax-time.
- Education Expenses: There are two education credits available — the American Opportunity Tax Credit and the Lifetime Learning Credit. The American Opportunity Tax Credit is a credit worth up to $2,500 for the expenses you paid for the first four years of college. The Lifetime Learning Credit, worth up to $2,000 per tax return, is available even if you aren’t pursuing a degree. Make sure you count books and lab fees — even the books you rent on sites such as Chegg and others.
- Camp for Your Kids: You may be entitled to the Child and Dependent Care Credit if your children are under the age of 13, and you took them to a before and after school care program, daycare, or day camp so that you can work or actively look for work. However, overnight and sleepover camps are not eligible for child tax credits. For tax year 2022, the maximum amount of care expenses you’re allowed to claim is $3,000 for one child, or $6,000 for two or more children. The percentage of your qualified expenses that you can claim ranges from 20% to 35%. The American Rescue Plan made some major changes to the Child and Dependent Care Credit for tax year 2021 only. For 2021, the expense limit increased from $3,000 for one qualifying individual to $8,000 and from $6,000 for more than one qualifying individual to $16,000. For tax year 2021, the credit was fully refundable, meaning you could get the credit even if you didn’t owe any taxes.
- Health Insurance: If you are self-employed, you can take a tax deduction for the health insurance premiums you pay for yourself and your family. If you are not self-employed, health insurance premiums paid after taxes may be tax deductible if you can itemize your deductions.
- Medical Expenses: Medical expenses, including miles driven for medical reasons (at 18 cents per mile), may be tax-deductible if they exceed 7.5% of your taxable income in 2022 and you are able to itemize your tax deductions. The cost of exercise equipment or purchasing and maintaining a spa or swimming pool may be tax-deductible as medical expenses if your doctor recommends them to mitigate a medical condition.
- Charitable Contributions: If you made any donations, no matter how small, remember to have your receipts ready since you may be able to deduct them. It’s easy to forget the smaller amounts you contributed to various walks or races, but they add up quickly. You can’t deduct the value of your time when you volunteer, but you can deduct your travel at 14 cents per mile as well as any parking and tolls you paid. The IRS temporarily allowed taxpayers to claim a deduction for charitable donations without itemizing other deductions. Under the CARES Act, in 2020 you were able to deduct up to $300 in cash donations if you claimed the standard deduction. For tax year 2021, this amount was up to $600 per tax return for those filing married filing jointly and $300 for other filing statuses. This provision does not apply to the 2022 tax year.
- State Income or Sales and Local Tax Deduction: You are permitted to deduct either the state income tax paid or the state sales tax paid, if you itemize your tax deductions. You can choose either but if you live in a state without a state income tax, it’s a no-brainer — you would deduct the state sales tax you paid. You are free to choose the one that gives you the biggest tax deduction. TurboTax will choose the option that gives you the biggest tax deduction based on your entries. The amount you are able to deduct is capped at $10,000 including property taxes, state income taxes or sales tax.
- Home Office: If you use part of your home regularly and exclusively to perform administrative or managerial activities for your self-employed business, you can claim a home office deduction for a portion of utilities, rent, mortgage interest, depreciation, maintenance and the like based on the square footage of your home used for your business. Many people who are employees that worked from home in 2022 may still be working from home and wondering if they can deduct at-home expenses. Following tax reform, you can no longer deduct at home expenses on your federal taxes if you are an employee.
- Miscellaneous itemized tax deductions: Miscellaneous itemized deductions like unreimbursed job expenses and tax preparation expenses, unless it’s tax preparation for your self-employment taxes, are no longer available on your federal taxes following tax reform. Uninsured losses due to fire, storms, shipwreck or theft more than 10% of adjusted gross income are tax-deductible only if they are the consequence of a federally declared natural disaster.
- Other Dependent Credit: If you are caring for someone other than a child dependent, take advantage of the new deduction. This is a tax credit of up to $500 per non-child dependent that you support.
Mileage Expenses: If you use your vehicle for business and you are self-employed, you can deduct your mileage 58.5 cents per business mile for the first six months of 2022 and 62.5 cents per mile for the last six months of 2022 (it was 56 cents per mile in 2021). If you work for multiple clients, the cost of traveling between job locations is tax-deductible as well.
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