As tax season approaches, many individuals and businesses are busy gathering documentation and crunching numbers to ensure they meet their tax obligations accurately and efficiently. However, in the rush to file on time, it’s easy to overlook some tax deductions that could potentially save you a significant amount of money. Here are some commonly missed tax deductions that you should keep in mind.
Home Office Deduction
With the rise of remote work, more people are eligible for the home office deduction than ever before. If you use a portion of your home exclusively and regularly for business purposes, you may be able to deduct expenses related to that space. This can include a portion of your rent or mortgage, utilities, and even home repairs. Be sure to keep detailed records and consult IRS guidelines to ensure you qualify.
State Sales Tax
While most taxpayers deduct state income taxes, the option to deduct state sales tax is often overlooked. This can be particularly beneficial if you live in a state without an income tax or if you made large purchases throughout the year, such as a vehicle or home appliances. The IRS provides tables to help calculate your deduction, or you can keep receipts from major purchases.
Medical and Dental Expenses
Medical and dental expenses can add up quickly, and if they exceed 7.5% of your adjusted gross income, they may be deductible. This includes not only direct medical bills but also travel expenses for medical care, health insurance premiums, and even home modifications required for medical purposes. Ensure you have thorough documentation to support these deductions.
Charitable Contributions
Donations to qualified charitable organizations are deductible, but many taxpayers fail to track non-cash contributions. Items like clothing, household goods, and even mileage driven for charitable purposes can be deducted. Always obtain a receipt from the charity and keep a detailed record of your contributions.
Educational Expenses
If you or a dependent pursued higher education, you might be eligible for education-related deductions or credits. The Lifetime Learning Credit, American Opportunity Credit, and deductions for student loan interest are all potential avenues to explore. These can significantly reduce your tax burden if you qualify.
Job Search Expenses
If you were looking for a new job in your current occupation, certain expenses incurred during your job search might be deductible. This can include resume printing, travel expenses for interviews, and even fees for employment agencies. However, this deduction is subject to certain restrictions and was suspended for tax years 2018-2025, so verify current eligibility.
Self-Employment Deductions
Self-employed individuals often overlook deductions related to their business activities. These can include costs for advertising, business-related travel, office supplies, and even a portion of your phone and internet bills. Additionally, contributions to a self-employed retirement plan and health insurance premiums are often deductible, reducing your taxable income.
Retirement Savings Contributions
Contributions to retirement accounts such as IRAs and 401(k)s can provide significant tax advantages. Not only do these contributions grow tax-deferred, but they can also reduce your taxable income in the year you make them. Take advantage of catch-up contributions if you are over 50 to maximize your savings.
Final Thoughts
Tax laws are complex and constantly evolving, which makes it easy to miss out on valuable deductions. By being aware of these commonly overlooked deductions and maintaining meticulous records, you can potentially reduce your tax liability and keep more of your hard-earned money. Always consider consulting with a tax professional who can offer personalized advice based on your specific situation.
