In the rush of filing taxes, it can be easy to overlook deductions that could help you save money. Tax deductions are expenses you can subtract from your taxable income. Knowing which expenses can be claimed as deductions is the key to limiting the hard-earned money you owe the government. From student loan interest payments to health expenses, here are some of the most overlooked tax deductions you should know:
How do deductions work?
Tax deductions lower the amount of tax you owe. A standard tax deduction—a single deduction of a fixed amount—is determined by your filing status: single, married, head of household, or filing jointly. You can claim the standard deduction without providing additional documentation or expense receipts. In contrast, itemized deductions are specific expenses you can deduct from your taxable income, such as clinical expenses, charitable contributions, and mortgage interest.
Most overlooked tax deductions
Job hunting expenses
If you are looking for a new job in your existing field, you may be able to deduct expenses such as those incurred in resume preparation, traveling for interviews, and career counseling services.
Many know that cash donations to charity can be claimed as deductions but often overlook non-cash contributions like clothing or household items.
Clinical and dental expenses
You can deduct expenses that exceed 7.5% of your adjusted gross income for clinical and dental care.
If you move for a new job, you may be able to deduct expenses such as transportation and lodging from the tax amount.
Student loan interest
If you are paying interest on a student loan, you can claim a deduction of up to $2,500.
Tax preparation fees
Taxpayers can deduct fees paid to tax professionals, tax software charges, and other tax-related expenses.
Sponsoring a child
The money you give an organization supporting underprivileged children can be tax deductible.
Home office expenses
If you use a portion of your house for business purposes, you might be able to deduct expenses incurred on that part of the house.
Energy-efficient home improvements
Taxpayers may be eligible for a tax credit for certain energy-efficient home improvements such as solar panels, geothermal heat pumps, and energy-efficient windows.
You can deduct gambling losses up to the number of your gambling winnings as long as you itemize your deductions.
So, you can maximize your tax deductions by understanding the expenses that qualify as deductibles. The savings here could be worth hundreds and thousands of dollars.