The Top 20 Tax Deductions You Could Be Overlooking
March 25th, 2022
When tax season rolls around, everyone is doing their best to try and get the biggest refund that they can. But there are many common tax deductions that people commonly overlook.
If you have neglected to look into any of the items on this list, you could be missing out on hundreds or potentially thousands of dollars in savings. Read on to find out what they are and how much money they could save you!
What Are Tax Deductions?
Tax deductions are certain exceptions outlined by the IRS that allow you to reduce the amount you pay based on particular situations you find yourself in or things you spend your money on throughout the year.
Tax deductions are subtracted from your overall taxed income, reducing the general tax liability you owe to the IRS.
Since the taxes you pay are percentage-based, you will be saving more on your tax bill when the exact percentage is applied when your base taxable income goes down.
20 Commonly Overlooked Tax Deductions
It is worth noting that some of these only apply for itemized deductions, and the standard deduction may be better for you depending on your situation.
Residential Energy Credit: If you have a solar energy system, you can deduct up to 26% of the installation cost of solar panels or solar water heaters.
Educator Deduction: If you incur any classroom expenses as a school teacher, you can deduct up to $250 of the money you spent on classroom supplies for your students.
Expenses When Self-Employed: This is an expense category for freelancers that covers things like health insurance and office upgrades that can save hundreds or thousands on your tax bill.
Home Office Deduction: If you work from home as a part of your job, self-employed or not, this deduction saves $5 per square foot of office space you maintain, plus an additional percentage of your rent cost based on your home office's amount of space.
Stimulus Check Deduction: Some people who were eligible for $1,400 stimulation checks never received them, and those people are still eligible to claim them on their tax return.
Credit for Saving: You can get a tax credit of 10% to 50% of contributions for an IRA or other retirement accounts up to $2,000 or $4,000 if filing joint taxes.
HSA Deduction: You can deduct payments and contributions to your health savings account (HSA) for up to $3,600 and $7,200 as a family.
Gambling: Expenses incurred gambling can be deducted only if you win.
Interest for Mortgage: You can deduct interest on your mortgage payments on your federal taxes if you qualify.
State Taxes: Your state taxes can be deducted up to a specific combination of $5-10k based on your marriage status.
Local Taxes: Like state taxes, these can also be deducted as a part of your state taxes in the combination of $5-10k.
Medical Cost: If you have medical expenses you haven't been reimbursed for, you can deduct the cost if it is more than 7.5% of your gross income.
Charity: You can subtract the amount of money you spend on charitable gifts from income subject to taxes if you itemize your taxes. You can subtract $300 per person even on a standard deduction.
Earned Income Credit: This one is worth $1,502 to $6,728 and depends on marital status and number of kids. If you make under $57,000, it is worth more.
Interest from Student Loans: You can subtract up to $2,500 from your tax bill depending on how much interest you put down on your student loans.
Credit for Lifetime Learning: 20% of the money you spend on tuition and school fees up to a maximum of $2000 can be deducted from your federal taxes.
Adoption: This credit gets you up to $14,440 per child you adopted.
Child Tax Credit: This one is worth up to $3,600 per child, and this one is possible to receive as an advance payment during the year.
Childcare Credit: This credit entitles you to a tax deduction for a percentage of daycare costs for children under 13.
Continuing Education: Saves you the cost of supplies for any work-related education, including transportation and books, and only includes things strictly related to your current job.