5 Things You Didn’t Know Were Tax Deductible
Nobody really likes doing their own taxes, especially if they know they’ll owe the IRS money. Unlike taxes, though, everyone likes saving money. So what if we told you that there are millions of dollars in deductions that are missed each year? As you begin preparing to file your taxes, you may be able to claim some of these oft-missed deductions:
Unless you get your side-hustle on as an Uber or Lyft driver, you probably don’t track the miles you drive. You may want to start now because you can get a serious deduction on your taxes. While the miles spent commuting to and from work may not be tax-deductable, miles spent driving for work are.
As of January 1, 2016, business miles earn you a whopping $0.54 per mile back. Also, if you’re constantly driving to and from doctors appointments, track those miles, too, because medical mileage earns you $0.19 per mile. If you’ve made a move within the last year, chances are you drove for some of that time. You can also deduct $0.19 per mile for moving miles if the distance between your old home and old job and old home and new job is at least 50 miles. Lastly, if you do a lot of volunteering or charity work, you can deduct those miles at a rate of $0.14 per mile driven in service of charitable organizations.
If you thought there was no possible way to make at least part of your homeowners insurance tax deductible, you thought wrong. If you own and operate a business out of your home, you can claim a deduction based on whatever percentage of expenses incurred from operating a business from home, compared to your total home expenses, by writing off that fraction of your homeowners insurance outlay. Also, there are several other deductions you may qualify for including mortgage interest on a refinance as an expense and real estate taxes.
One of the more costly annual expenses may be your or your child’s college tuition. Education credits, like the American Opportunity Tax Credit and the Lifetime Learning Credit, and deductions, like the Tuition and Fees Deduction or the Qualified Education Expenses Deduction, reward taxpayers supporting those pursuing higher education thousands of dollars each year.
In addition to the costs of tuition and other education-related expenses, students who are not claimed as dependents can qualify to deduct up to $2,500 of student loan interest paid by themselves or their parents (as the IRS treats the payment as a gift from parent to non-dependent child who then pays the interest themselves).
In addition to any miles driven in service of charitable organizations, those who itemize their taxes can also deduct donations of money or property made to qualified charitable organizations from their taxes. In addition to the warm and fuzzy feeling you get inside when you give back to your community, the deduction, which can amount up to 50 percent of your adjusted gross income, is certainly a nice incentive.
Childcare or Other Caregiver
If you spend less than $3,000 (for one qualifying individual) or $6,000 (for two or more qualifying individuals) on a caregiver for your children, disabled spouse, or other qualifying person, you may be eligible for the Child and Dependent Care Credit, which grants you a credit of up to 35 percent of caregiving-related expenses. This credit is quite restrictive, though, and not profitable for everyone since it is not available to those who pay for care under-the-table. You will likely have to be recognized as a household employer and pay the same taxes that any business would in addition to employee wages, which is what makes this credit prohibitively expensive to many individuals.
If you’re in a new financial situation or maybe considering filing for one or more of the above credits or deductions, be sure to consult with a tax professional or financial consultant. Not all deductions work best for everyone’s situation, but that’s no reason to bypass any of the above options.