The government may have been shut down for a good chunk of the new year, but tax season is still upon us.
Before you start filing your taxes, there are some important things you need to consider — including potential tax deductions you may be overlooking.
Many people don’t realize all of the tax deductions for which they qualify. If you’re part of this group and want to maximize your return, keep reading.
Listed below are nine commonly overlooked tax deductions you ought to try and claim this year.
1. Charitable Contributions
Did you donate money to charity in 2018? Whether they were big or small, you can deduct these donations from your tax bill at the end of the year.
In addition to actual monetary donations, you can also deduct other expenses related to charity or volunteer work.
For example, if you prepared meals to take to a soup kitchen, you can deduct the cost of ingredients needed to prepare those meals. Or, if you were involved in some kind of charity that required you to drive your car, you can deduct 14 cents for every mile driven.
2. Moving Expenses
In the past ten years, 11 percent of job seekers had to relocate for work. Did you have to move in 2018 to take your first job?
Normally, when you have to relocate for a new job, the company that hired you will cover the cost of your move. For your very first job, though, that’s not necessarily the case.
If you had to foot the bill for your move, you can deduct those costs from your 2018 tax bill. This includes the cost of moving supplies, professional movers, and the miles you had to drive to get to your new location.
3. Child and Dependent Care
This is technically a tax credit, not a deduction, but it’s still an important one to consider if you’re looking to reduce your tax bill.
Even if your childcare bills are covered through a reimbursement account provided by your employer, you may still qualify for a tax credit.
Legally, you can charge up to $5,000 worth of expenses through this reimbursement account. If you spend the maximum and then have to spend more, you can claim a child and dependent care credit on the extra money you spent, up to $1,000.
4. Earned Income Tax Credit
This is another tax credit that can help you decrease your tax bill.
The Earned Income Tax Credit, or EITC, is a refundable credit that can reduce your bill anywhere from hundreds to thousands of dollars.
This credit helps to supplement wages for low- and moderate-income workers. It’s also available to individuals who lost a job, worked fewer hours, or received a pay cut during the year.
The exact amount available to you will vary depending on your marital status, family size, and income.
5. Reinvested Dividends
Many investors have mutual fund dividends reinvested automatically.
If this applies to you, it’s important to note that, every time these dividends are reinvested, your tax basis increases. This, in turn, can reduce the amount of taxable capital gain that is available to you when you decide to sell your shares.
If you do not factor in the reinvested dividends when you’re filing your taxes, you could end up overpaying. There are lots of tools online that can help you make sure you get credit for all of those reinvested dividends.
6. Gambling Losses
Did you lose money while gambling in 2018? You might be surprised to learn that you can actually get some of that money back.
In order to take advantage of this deduction, you need to itemize. It also only applies to the number of gambling winnings that you report as part of your taxable income.
If you take this deduction, you’ll need to hang on to all of your gambling receipts, as well as receipts for things like raffle and lottery tickets.
You may also want to keep a daily diary that tracks your gambling activities and includes the specific amounts of money you won or lost, as well as the location of the different gambling establishments you visited.
7. Medical Expenses
You can also deduct a portion of your medical expenses, too.
The IRS allows you to deduct any expenses that go beyond 7.5 percent of your Adjusted Gross Income (also known as your AGI).
For example, if your AGI was $50,000, you could deduct any medical expenses that exceeded $3,750.
You can also deduct a portion of the money you pay for long-term care insurance. You can deduct the cost of transportation needed to obtain medical care, too. This includes mileage, car expenses, tolls, and parking expenses.
8. Homeowner Deductions
There are lots of deductions available to you if you own a home.
For example, you can deduct the mortgage points you paid when you bought your home or refinanced it.
You can also deduct the cost of private mortgage insurance premiums. You can deduct your property taxes, too, and the interest you paid on loans up to $750,000.
9. Private School Tuition
You may also be able to claim a deduction for your child’s private school tuition.
A 529 savings account used to only be meant for college tuition. Now, though, you can also use this tax-free account to pay for private elementary and secondary school tuition.
If you do use this account to pay for your child’s (or children’s) tuition, you can deduct the cost of tuition up to $10,000 per student from your yearly tax bill.
You can also pay tuition from multiple 529 accounts, but your contributions cannot exceed the yearly limit.
Claim These Overlooked Tax Deductions Today
As you can see, there are a lot of different commonly overlooked tax deductions that you ought to try and take advantage of.
Not sure whether you can claim a certain tax deduction? Consider working with a CPA.
A CPA can help to simplify the tax preparation process and ensure you get the greatest amount of money back in your return.
If you live in Florida, Utah, New York, Maryland, or Washington, D.C., contact us at Gary M. Kaplan, CPA today.
We’ll respond within 24 hours to schedule a free consultation and help you decide if our services are right for you.
