If your goal is to cut your tax bill, then seizing every deduction you are owed is a must. The trick is, many people miss out on tax savings simply because they weren’t aware of a tax break that’s available to them. As a result, they end up overpaying. Luckily, by learning about commonly overlooked deductions and tax breaks, you increase your odds of snagging everything you’re eligible to have. With that in mind, here are seven commonly missed deductions and tax breaks everyone should know about.
1. Childcare
If you need to pay for childcare for your kids so that you can work, you may be eligible for a childcare tax credit. Generally, the value is between 20 and 35 percent of what you had to pay for qualifying care for your kids. For households with two or more children in work-related childcare, the credit is potentially worth up to $6,000.
You may even qualify for a partial credit if you take advantage of a company-provided childcare reimbursement account. However, only any amount paid above and beyond what’s available in that account is potentially eligible for a credit.
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2. Jury Pay Handed to Your Employer
Some employers pay workers their typical wages when they are on jury duty. However, in exchange for full pay, they request the employee’s jury pay.
The trick is, when you file your taxes, you have to report the jury pay as income. But if you sent that money to your employer, you can also add a deduction, offsetting the amount.
Just make sure that you have records of both the jury pay and the money being given to your employer. That way, if you need to back up your deduction claim, you’ve got everything you need.
3. Dependents Tax Credit
If you have an older child who is no longer eligible for the child tax credit but still qualifies as a dependent – such as a college student – you may be able to claim a different tax credit worth $500. The same goes for caring for a dependent adult in your home, such as an aging relative.
4. Gambling Losses
Whether you headed to a casino or decided to gamble online, any of your gambling losses could be deductible. You can only access this deduction if you’re itemizing, and it’s also limited to the amount of winnings you need to tareport as taxable income. However, by using your losses for a tax break, you can reduce your liability.
It’s also important to note that you don’t have to have casino-related losses. Bingo, raffle tickets, and lottery tickets also qualify as gambling, so those losses are potentially deductible, too.
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5. Mortgage Refinancing Points
If you used points when you refinanced a mortgage, you usually have to deduct the points over the life of the loan, dividing the value based on the term of the mortgage and applying it for that number of years. Since loans can last 15 to 30 years typically, it’s easy to forget about the deduction after a few years. As a result, many taxpayers miss out on this benefit.
However, if you did a refinance to support home improvements, you might not have to wait. In some cases, you can claim the full value of the points related to the improvement in one go. Then, if there are non-improvement-related points, those get split out over the life of the loan.
6. Lifetime Learning Credit
Even if your college years are largely behind you, that doesn’t mean you can access a credit to offset ongoing education. With the Lifetime Learning Credit, you can claim up to $2,000 a year to reduce the functional cost of classes designed to boost job skills.
7. Military Reservist and National Guard Travel Expenses
If you’re a military reservist or National Guard member who has to travel 100 miles or more to attend meetings or drills, must stay overnight, and uses their own car to get there, you may be able to deduct the cost of lodging, half the cost of your meals, and tap a mileage-related reimbursement. Plus, if you have to deal with tolls or parking fees, those may be deductible, too.
Accessing this deduction does mean itemizing. However, if the value of itemizing exceeds the standard deduction, it’s worth capturing this savings.
Do you know of any other commonly overlooked deductions and tax breaks people should know about? Share your thoughts in the comments below.
Read More:
- IRS Tax Help: Where to Start
- Comprehend the Common Tax Problems and Get Ready for the Future
- How Much Tax Do You Pay on Gambling Winnings?
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