Even if you are diligent about tracking your expenses, saving receipts, and compiling a list of eligible write-offs for the tax season, you may still be overlooking certain tax deductions that can lower your overall taxable income. By taking advantage of every possible deduction, you can shrink your taxable income and reduce the amount of tax dollars you owe. Here are six overlooked tax deductions that can help you save money on your upcoming taxes:
1. Moving expenses
Moving is not commonly a cheap endeavor, but it is usually worth it, and not just for personal or professional reasons—if you recently moved for work, you may be able to deduct the moving costs. The IRS lets you deduct moving expenses as long as you meet two conditions: first, you must be employed at your new location; second, you must have a new place of residence. Make sure to keep the receipts for things like gas and tolls, as the IRS does require you to keep records. These deductions may not make a huge difference in your taxes, but every little bit helps.
2. Medical expenses
Medical expenses are one of the most overlooked tax deductions. They include any out-of-pocket costs you pay for healthcare, from insurance premiums to co-pays, as well as any costs related to the treatment of a specific condition. That includes the cost of prescriptions, eyeglasses, hearing aids, dentist visits, and even things like the expense of a special diet due to a condition.
3. Student loan interest
If you have student loans, you can deduct the interest you pay on them. That goes for private loans as well as federal loans. You can even deduct the interest on your spouse’s student loans as long as you are filing a joint tax return. The catch here is that you can only deduct the amount above what you would earn from a savings account, because the IRS treats the interest as a personal expense.
4. Child and dependent care tax credit
If you have a child under the age of 13 or a loved one or senior in your care who cannot take care of themselves, you may be eligible for a tax credit. This is a non-refundable credit, meaning that it reduces the amount you owe, rather than increasing the amount you receive as a refund. You can claim this credit if you pay someone to care for your child or another qualifying dependent so you can work, or if you pay someone to provide specialized care for a family member who is either elderly or has a disability. The deduction amount varies according to your income, but it can be as much as $2,100 per year. That’s not a lot compared to other tax credits, but it’s always worth checking to see if you qualify. Many parents can also write-off child and dependent care as part of their taxes.
5. Charitable donations
Chances are good that you donate to charity every once in a while. But how many of you deduct it from your taxes? The good news is that you can deduct the fair market value of whatever you donate as long as you keep track of what you give, when you give it, and to whom you give it. If you donate goods that are worth less than $250, you can deduct the full price. Otherwise, you have to use the fair market value. That is the price at which the item would sell in a store, minus the cost of transporting it. For example, if you donate an old television that you were planning to throw away, you can deduct the fair market value, which is the price you would get from a used store.
6. The disability tax credit
The disability tax credit is for people who are unable to work due to a disability, injury, or chronic condition. It is non-refundable and worth up to $5,000 per year. People often think that only people with severe disabilities can get this deduction, but you can also get it if your disability keeps you from working for at least 90 days out of the year.
