If you’re unsure about all the deductions you’re entitled to on your tax return, listen up. Many people overlook potential deductions that can save them a substantial amount of money simply because they’re not aware of them. Here’s a guide to twelve surprising things you might not know you can claim on your tax return.
1. Job Search Expenses
Yes, the money you spent on landing your new gig could potentially come back to you. The IRS allows you to deduct expenses related to your job search, including travel costs, resume preparation fees, and even the cost of hiring a career coach. It’s important that these expenses are associated with searching for a job in your current field, not for a new career path, to qualify for the deduction. And remember, keeping detailed records and receipts is crucial to substantiate these deductions should you need to.
According to a report by the Tax Policy Center, these deductions are often overlooked but can significantly impact your taxable income if utilized correctly. This is particularly true for people who have been unemployed for short or even longer periods and have incurred significant expenses in their job search. Just bear in mind, these deductions can only be claimed if they, along with your other miscellaneous expenses, exceed 2% of your adjusted gross income. So, it’s worth doing the math to see if you come out ahead.
2. Home Office Costs
If you’re among the growing number of people working from home, you might qualify for a home office deduction. This isn’t just for full-time remote workers — even if you work remotely only part-time, you might still be eligible. The key here is that your home office must be used “exclusively and regularly” for your work activities. This deduction applies to both self-employed people and those who are employed but working from home due to company policy.
The deduction allows you to write off a portion of your home expenses, such as utilities, rent, and internet, based on the square footage of your home office compared to your entire home. It’s a great way to make your living space work for you financially. However, precision is important; you’ll need to measure your space accurately and maintain records of your household bills. The IRS provides a simplified option too, where you can claim a standard deduction of $5 per square foot of your home office space, up to 300 square feet.
3. Health Savings Account Contributions
Contributions to your Health Savings Account (HSA) can be a smart way to save on taxes while preparing for future medical expenses. HSAs are tax-advantaged medical savings accounts available to people enrolled in high-deductible health plans. Contributions made to your HSA are tax-deductible, and what’s more, the money grows tax-free and can be withdrawn tax-free for qualified medical expenses.
According to the IRS, contributions made by your employer are excluded from your taxable income, which can result in significant tax savings. In addition, your unspent HSA balance rolls over from year to year, so you don’t lose the money if you don’t use it within a certain time frame. This makes HSAs a powerful tool for long-term financial planning, especially when you consider healthcare costs in retirement. Just make sure to keep receipts for all medical expenditures to prove they were qualified expenses.
4. Education Expenses
Whether you’re a lifelong learner or just brushing up on some professional skills, education expenses can offer tax relief. The Lifetime Learning Credit is a fantastic break that covers tuition and fees for courses taken to acquire or improve job skills. This credit is worth up to $2,000 per tax return, which can be a substantial save. Unlike other credits, there is no limit on the number of years you can claim it.
To qualify, you don’t have to pursue a degree; you just need to be enrolled in an eligible institution. That flexibility means it’s available for a wide range of educational pursuits, from professional courses to community college classes. Just make sure that the educational institution is accredited and that you receive a 1098-T form for your taxes. Keep in mind, this credit phases out as your income rises, so check the current income limits before you plan your educational journey.
5. Childcare Costs
If you pay for childcare, you might be eligible for a tax credit that helps cut these costs. The Child and Dependent Care Credit is designed for working parents, including those who are looking for employment. It covers a percentage of the expenses paid for the care of children under the age of 13, enabling you to work or actively search for a job.
According to the IRS, this credit can be worth up to $3,000 for one child or up to $6,000 for two or more children. To qualify, both parents must be earning income unless one is a student or incapable of self-care. Don’t forget to collect documentation; you’ll need the provider’s name, address, and tax ID number. Remember, these credits directly reduce the amount of taxes you owe, which can be more beneficial than a simple deduction.
6. Moving Expenses
If you’re a member of the Armed Forces, there’s some good news when it comes to relocation. Active duty military personnel can deduct unreimbursed moving expenses when they’re required to move due to a military order. This can include costs like shipping, storage, travel, and lodging. The deduction applies if the move is within one year of ending active duty.
The key here is the “active duty” status and that the move is a direct result of a military order. This means if you’re stationed in a new location and incur out-of-pocket expenses, you can claim them on your tax return. Ensure you keep a detailed log of all your expenses and retain your military orders as proof. This deduction isn’t offered to civilian employees, so it’s a unique benefit for those serving the country.
7. Charitable Donations
If you’re someone who gives generously to charity, your goodwill could come with added tax benefits. Charitable contributions to qualifying organizations can be deducted if you itemize your deductions. This includes not only cash donations but also non-cash items like clothing and household goods. Even mileage driven for charitable activities can be deducted.
According to Charity Navigator, the tax law imposes certain limits on how much of your contributions can be deducted relative to your income. However, temporary measures have increased the limits to encourage more charitable giving. Be meticulous about keeping records such as donation receipts and acknowledgment letters from charities. It’s important that the organizations you donate to have a tax-exempt status with the IRS to qualify for the deduction.
8. State Sales Tax
Here’s a gem for those who reside in states without a state income tax: you can choose to deduct state and local sales taxes instead. This deduction might be more beneficial for you if you made large purchases, like a vehicle or home renovation, where the sales tax is substantial. It’s an excellent choice for residents of states like Florida or Texas where there’s no state income tax.
You can use the IRS’s sales tax deduction calculator to figure out the total amount you’re eligible to deduct. This tool considers the state and local sales tax rates and your income level to provide an estimate. Remember, though, you must choose between deducting state and local sales taxes or state and local income taxes, so it’s important to weigh which gives you the greater tax benefit. Keeping receipts for large purchases is crucial, as they substantiate your claim.
9. Gambling Losses
Are you a fan of blackjack or poker? If Lady Luck wasn’t on your side last year, there’s a silver lining: gambling losses can be deducted on your tax return. The catch is, you can only claim losses up to the amount of gambling income you reported. This means if you won $3,000 but lost $4,000, only $3,000 of your losses can be deducted.
It’s important to maintain thorough records of your gambling activities, including receipts, tickets, and statements that document your wins and losses. This deduction can only be claimed if you itemize your deductions, so it’s not available if you take the standard deduction. Just remember, this is about reporting your true income and losses; inflating your losses to reduce taxes could lead to issues with the IRS. It’s all about balancing the books in your favor — honestly.
10. Jury Duty Pay
If you’ve been called for jury duty and your employer continues to pay you while you serve, any jury duty pay you receive might have to be turned over to your employer. Here’s the kicker: even though you’re handing over that money, the IRS still considers it taxable income. However, you can claim a deduction to offset this, ensuring you’re not taxed on money you never really pocketed.
This can feel a bit like a tax maze, but the logic holds: you shouldn’t be taxed on income that you didn’t keep. Make sure to keep records of any jury duty payments and the amount you remitted to your employer. It’s a small but significant way to ensure your taxes accurately reflect your earnings. And while it might seem like a lot of effort for a small return, every little bit helps when it comes to maximizing your tax savings.
11. Union Dues and Memberships
If you’re part of a union or a professional organization, those dues might be deductible. This deduction applies to fees and assessments required as conditions of membership in a union or professional organization. It also includes any job-related expenses, like subscriptions to professional journals or attending seminars related to your field.
However, this deduction falls under miscellaneous expenses, which must exceed 2% of your adjusted gross income to qualify. Keeping track of these expenses can be beneficial, especially if you’re in a field where membership and professional development are crucial. By deducting these fees, you can lower your taxable income while enhancing your career opportunities. It’s a win-win for your wallet and your professional growth.
12. Out-of-Pocket Expenses
Teachers often go above and beyond, sometimes reaching into their own pockets for classroom supplies, and tax deductions recognize this dedication. Educators can deduct up to $250 of unreimbursed expenses for classroom supplies, even if they don’t itemize deductions. This includes books, supplies, computer equipment, and supplementary materials used in the classroom.
If both spouses are educators and file jointly, they can each claim the deduction, doubling the benefit. It’s a small token of appreciation for the significant impact teachers have on their students’ lives. Just make sure to keep receipts and records of all purchases to substantiate your claim. This deduction not only helps educators keep more of their income but also acknowledges the extra effort they put into shaping future generations.
This article is for informational purposes only and should not be construed as financial advice. Consult a financial professional before making investment or other financial decisions. The author and publisher make no warranties of any kind.
