Deadline Approaching: Maximize Your Tax Deductions! 🔥
Five Key Tax Breaks You Absolutely Shouldn't Overlook
With the looming April 15 deadline, it's essential to take advantage of every possible deduction! Tax guru, Andy Phillips (VP of H&R Block's Tax Institute), reports a surge of queries from filers eager to maximize their savings. But what about the common deductions often overlooked? Here's a lowdown on the deductions every filer should grasp.
Retirement Contributions 💰
Contributions towards tax-advantaged retirement accounts (IRA, 401(k), etc.) could mean paying less tax. You might even miss the benefit if automatic contributions are made with your paycheck, as pre-tax money drains out before your taxes do, reducing your taxable income.
Traditional IRA contributions can still snag you a tax break if you're not tied to an employer plan. However, if you're also participating in an employer plan, your tax break may be limited. For self-employed taxpayers, SEP IRA and SIMPLE IRA contributions serve as "above-the-line" tax deductions. Check out other self-employment deductions below.
Self-Employment Expenses 🤑
The booming side-hustle trend means self-employment expenses are widespread. Deductible expenses include qualified health insurance, half your self-employment tax, internet costs, office supplies, advertising, and business travel. Plus, for eligible individuals, consider the home office deduction!
Student Loan Interest 🎓
If you bear student loan debt, huzzah! You can deduct some or all of the year's interest on a qualified student loan. Federal student loan borrowers can deduct up to $2,500 of student loan interest per tax return per tax year. No need to itemize deductions to claim it!
Charitable Contributions 💭
To deduct your charitable donations, you must itemize your deductions. Regular givers to a church or charity frequently find it worth itemizing these deductions. Remember to grab a receipt for your donations, whether they're cash or goods. Additionally, track your mileage when driving for a charity; it's tax-deductible too!
Your Little Ones 👶♀️
You could claim all qualifying children born or adopted within the tax year. Children born on Dec. 31 are eligible, although children born after Dec. 31 must wait to be claimed in the next year's return. To qualify as your dependent child, they should be:
- Related to you as your child, foster child, sibling, half-sibling, step-sibling, or descendant of any of them;
- Under age 19, a full-time student under age 24, or permanently and totally disabled;
- Not providing more than half of their own support; and
- Living with you for more than half of the year they were alive.
Important: If your dependent earns income, you can still claim them as long as other dependent rules apply. Their earned income doesn't impact your return.
What Can't You Deduct from Your Taxes? 🚫
While hunting for deductions, prepare for some roadblocks.
Commuting Costs 🚗
Unfortunately, commuting costs aren't tax deductible. These expenses incurred between home and work aren't deductible, regardless of the distance. This rule applies to driving, as well as fares for public transportation.
However, if you're a reserve service member, travel expenses beyond 100 miles from home may be deductible.
Feline Vet Bills 🐾
Sadly, pet medical expenses aren't deductible as medical expenses on your tax return. The exception? Service animals like guide dogs, which assist the disabled or visually impaired, may have medical expenses covered. Their food, grooming, and medical care are potential deductions.
Stay organized and consult a tax professional if you have doubts. By optimizing these deductions, you could potentially lower your tax liability, keeping more of your hard-earned money! 🤑🚀💰🚀🤑
- Tax filers should examine their retirement contributions to ensure they are not missing out on potential tax deductions, especially with contributions towards tax-advantaged accounts like IRA or 401(k) potentially reducing taxable income.
- Self-employed individuals have a particular opportunity to maximize their tax deductions by including expenses such as qualified health insurance, internet costs, office supplies, advertising, and business travel in their claims, with the home office deduction and SEP IRA or SIMPLE IRA contributions also being notable.
- If a filer has missing tax deductions related to student loan interest or charitable contributions, they can still claim these deductions by itemizing their deductions and keeping track of relevant receipts, including mileage during business-related trips for charities.
