There are many tax deductions that exist, and not many people are aware of them. Here are ten tax deductions you can explore to see if you qualify for them and if you do, embrace them as it can make significant differences in your refunds.
- State Sales Tax
By using the IRS’ calculator, you can get an estimate of how much you can deduct from your state and local sales taxes.
- Reinvested Dividends
When you reinvest in mutual funds, you’ll automatically have dividends. Include it in your cost basis. While this isn’t exactly a deduction, it can definitely reduce your overall tax liability. Through this method, when you sell your shares, you reduce the overall taxable capital gain.
- Charitable Contributions
Out-of-pocket charitable contributions are tax-deductible, too, not just big donations. The next time you purchase canned food to be donated to a shelter or buy ingredients to bake cakes for a charity bake sale, keep track of these receipts as you can add up your charitable expenses. You can use a tax return calculator to see how much you’ve accumulated in charitable deductions.
- Interest Accumulated on Student Loans
You can take the deduction for a student loan if you’re servicing the loan yourself, i.e., you’re the one obligated to pay. The IRS states that if someone else pays for your student loan, then it’s viewed as you were given the money, and in that right, you’re not eligible for a deduction. The person paying the loan is eligible.
- Child and Dependent Care
You can claim up to $6,000 of applicable expenses under the Child and Dependent Care Tax Credit.
- Tax Credit on Earned Income
EITC, or Earned Income Tax Credit, helps families who have low to moderate-income levels. This tax benefit greatly benefits families with children. If you have three or more kids, you can claim a credit of up to $6,557.
- State Income Tax
This is the tax that was paid on last year’s return. If you paid money on your state income tax return last year, this means you can add that to any other state income tax and use it as an itemized deduction up to $10,000.
- Jury Duty
If you were on jury duty, you could claim this on your taxes. If your company paid you while you were on jury duty, but you were required to hand over your jury duty pay given by the court, you’re eligible to claim this amount as an adjustment to the income.
- Medical Miles
While medical expenses are subjected to an overall AGI threshold, you can check what the qualifying reimbursements are if you made any payments for medical bills. Check what the threshold is when filing your taxes to see if you’re eligible.
- Charity Miles
Charity miles are fully deductible at 14 cents per mile as of 2019. If, for instance, you drove 60 miles each week to volunteer at your local charity, that is an additional $436.80 deduction.
- 52 weeks/year x 60 miles/week = 3,120 miles you drove in a year
- 3,120 miles x $0.14/mile = $436.80
As always, it’s always good to keep records of payments you made, contributions, as well as your deductions when filing your taxes. All it takes is a folder to keep your receipts, an excel sheet to key in your expenses and income, as well as a calculator.