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Discover the most overlooked tax deductions you may be missing out on! From student loan interest to home office expenses, this comprehensive guide reveals how to maximize your tax savings and boost your refund. Don't leave money on the table—learn more today!
Tax season can be overwhelming, and in the rush to file, many taxpayers miss out on valuable deductions that could save them hundreds or even thousands of dollars. Whether you're an individual filer or a small business owner, understanding commonly overlooked tax deductions is key to lowering your taxable income and maximizing your refund.
In this blog post, we’ll explore some of the most commonly overlooked tax deductions, explain who qualifies for them, and offer tips on how to ensure you don’t leave money on the table.
For those burdened by student loan debt, the student loan interest deduction can provide significant relief. Many taxpayers overlook this deduction because they either assume they don’t qualify or are unaware of its benefits.
What it is: You can deduct up to $2,500 of student loan interest you paid during the tax year. This is considered an "above-the-line" deduction, meaning you don’t have to itemize your deductions to claim it. It’s available to all qualified taxpayers who meet the income thresholds.
✅ Who qualifies: To be eligible, your modified adjusted gross income (MAGI) must be less than $85,000 (or $170,000 for joint filers). The deduction starts to phase out for incomes above $70,000 (or $140,000 for joint filers).
How to claim it: Your student loan lender should send you Form 1098-E if you paid more than $600 in interest during the year. If you paid less, you’ll need to track your payments yourself.
Did you know that you can choose to deduct either state income taxes or state sales taxes on your federal return? Most people opt to deduct state income taxes, but in states with no income tax (like Florida, Texas, and Washington), the sales tax deduction can be highly beneficial.
What it is: You can deduct the state and local sales taxes you paid throughout the year, particularly if you made large purchases, such as a car, home renovation materials, or other big-ticket items.
✅ Who qualifies: This deduction is most beneficial for those living in states with no or low income tax. You can either track all the sales tax you paid during the year or use the IRS’s sales tax deduction calculator, which estimates your deduction based on your income and state’s sales tax rate.
How to claim it: You’ll need to itemize your deductions on Schedule A of your Form 1040 to take advantage of this.
Medical and dental expenses can add up quickly, and many taxpayers assume they won’t be able to claim these costs. However, if your unreimbursed medical expenses exceed 7.5% of your adjusted gross income (AGI), you can deduct the excess.
What it is: You can deduct qualified medical and dental expenses for yourself, your spouse, and your dependents. This includes costs like doctor’s visits, prescriptions, health insurance premiums (if not employer-paid), surgeries, dental work, and even mileage to and from medical appointments.
✅ Who qualifies: You must itemize your deductions, and your unreimbursed medical expenses must exceed 7.5% of your AGI.
How to claim it: Track your medical expenses throughout the year, and itemize your deductions on Schedule A.
If you run a business from home or work remotely, you may be eligible for the home office deduction. This is a highly overlooked deduction because many people believe they don’t qualify, especially if they work remotely part-time.
What it is: You can deduct a portion of your mortgage, rent, utilities, and other home-related expenses that are attributable to the part of your home used exclusively for business. The IRS offers a simplified method (based on square footage) or the regular method (based on actual expenses).
✅ Who qualifies: To qualify, the space must be used regularly and exclusively for business purposes. If you’re a remote worker employed by a company, you typically won’t qualify unless you're self-employed or running a side business.
How to claim it: If you qualify, you can claim the deduction on Form 8829 (for self-employed individuals) or directly on Schedule C for business income.
If you’re self-employed, you likely already know that you can deduct certain business expenses. However, many self-employed individuals miss out on lesser-known deductions that can further reduce their tax bill.
While most people remember to deduct their large charitable donations, smaller donations or out-of-pocket expenses related to charity work are often overlooked.
What it is: You can deduct the fair market value of cash and non-cash donations, such as clothing, household items, and even travel expenses if you're volunteering for a qualified charity.
✅ Who qualifies: You must itemize your deductions to claim charitable contributions. The deduction applies to donations made to qualified 501(c)(3) organizations.
How to claim it: Keep detailed records of your donations, and ensure you have receipts for donations over $250. You’ll report your donations on Schedule A.
If you were looking for a new job in the same field during the tax year, your job search expenses could be deductible. This deduction is often overlooked because taxpayers don’t realize that job hunting costs are considered deductible business expenses.
What it is: You can deduct expenses like resume preparation, travel expenses for interviews, job placement agency fees, and even the cost of relocating if you moved more than 50 miles for a new job.
✅ Who qualifies: To qualify, you must be searching for a job in your current field. The job search expenses must exceed 2% of your AGI to be deductible.
How to claim it: Track your job search expenses and report them as miscellaneous deductions on Schedule A.
Teachers and other eligible educators can deduct up to $300 of out-of-pocket expenses for classroom supplies. Many educators aren’t aware of this deduction, especially if they don’t itemize their deductions.
What it is: Educators can deduct expenses for books, classroom supplies, computer equipment, and other materials used in the classroom.
✅ Who qualifies: To qualify, you must work at least 900 hours a year in a K-12 school as a teacher, instructor, counselor, or principal.
How to claim it: You can claim this deduction directly on Form 1040; it doesn’t require itemizing.
The Saver’s Credit is a little-known credit that rewards low- to moderate-income earners for contributing to retirement accounts like IRAs or employer-sponsored plans.
What it is: The credit is worth up to 50% of your retirement contributions, depending on your income. The maximum credit is $1,000 ($2,000 for joint filers).
✅ Who qualifies: Single filers with AGI up to $36,500 and married couples with AGI up to $73,000 qualify for the Saver’s Credit.
How to claim it: Report your retirement contributions on Form 8880 to claim this credit.
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Don't leave money on the table! From student loan interest to self-employment expenses, there are numerous deductions that can reduce your tax bill and boost your refund. Keep these commonly overlooked deductions in mind when preparing your next tax return, and consult with a tax professional if you’re unsure about your eligibility. Every dollar saved in taxes is a dollar you can reinvest into your future!
Being audited is comparable to being struck by lightning. You don't want to practice pole vaulting in a thunderstorm just because it's unlikely. Making sure your books are accurate and your taxes are filed on time is one of the best ways to keep your head down during tax season. Check out Vincere's take on tax season!
This post is just for informational purposes and is not meant to be legal, business, or tax advice. Regarding the matters discussed in this post, each individual should consult his or her own attorney, business advisor, or tax advisor. Vincere accepts no responsibility for actions taken in reliance on the information contained in this document.
For business tax planning articles, our tax resources provides valuable insights into how you can reduce your tax liability now, and in the future.
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