8 Tax Deductions You Didn’t Know You Could Write Off
Around tax season, the word “deduction” is music to our ears. We take a deduction and watch the amount of taxes we owe go down, reminding us that maybe taxes will work in our favor this year. So, as you wind down your tax preparation, you might be looking to add a few last-minute deductions.
There are several deductions that are commonly overlooked. We’re sharing our most common ones in hopes that you find them helpful. If you’ve already filed, bookmark this blog article as you begin planning for next year. Or, better yet, engage a financial advisor to kick off next year’s tax planning early. The sooner you plan, the more your taxes can work for you instead of against you.
Here are the most common deductions we see clients overlook come tax time.
9 Commonly Overlooked Tax Deductions
1. Child Care Credit
Child care is a massive expense for working parents. The good news, though, is that you may be able to take a deduction of 20 to 35% up to $3,000 for one child who is up to 13 years of age. For two or more children, the deduction is up to $6,000. This deduction can also apply to disabled dependents you care for, such as a spouse or parent.
2. HSA Contributions
Any contributions you make to your HSA throughout the year can be counted as tax deductions. Note that any contributions made by your employer will not be counted.
3. Medical and Dental
If you’re paying your own medical and dental insurance premiums, you can count those expenses as a deduction (as long as they exceed 7.5% of your adjusted gross income). This deduction also applies to those who have paid medical expenses within the year that total more than 10% of their adjusted gross income; the amount is lower for those 65 years of age and older at 7.5%.
4. Student Loan Interest
Your dreaded student loans might actually save you money on your taxes. You are able to deduct the amount that you paid or $2,500, whichever is less.
5. Lifetime Learning
Education-related deductions are a fantastic incentive to continue developing your skills! You can receive a Lifetime Learning credit of up to $2,000 per year, and the credit is not limited to just four years.
6. College Savings
Some, but not all, states allow you to deduct contributions to a 529 college savings plan. You will not be able to deduct this expense from your federal taxes, however,
7. State Taxes
If you owed state taxes last year, good news! You can take an itemized deduction for that amount on this year’s return. You can deduct up to $10,000 for your state and local taxes owed the previous year.
8. Fostering a Pet
If you’ve opened your home to an animal in need, you could qualify for a deduction. Be sure to save your receipts for food, vet visits, and any other pet-related expenses.
These are just a few of the most common deductions that clients forget to include or mention to their advisor or tax accountant. Reaching out to a financial advisor will help you determine every tax deduction you might qualify for, reducing your taxes owed or even increasing your tax refund. This simple step can save you money and put you on a clear financial plan that works toward your long-term goals.
Ask an Advisor
Southwestern Investment Group is a family of financial advisors who can guide you in the right direction for tax preparation. We ensure you aren’t missing possible tax breaks and that every piece of your financial plan is working to your advantage.
Contact us to discover what holistic financial planning can do for your future.
How Small Business Owners Can Protect Themselves Financially
June 24, 2020
As a small business owner, you put your blood, sweat, and tears
6 Encouraging Signs During This Difficult Market
June 17, 2020
Countless businesses have scaled back or even closed during the COVID-19 pandemic,
How Much Cash Should You Have on Hand?
May 6, 2020
Famed investor Warren Buffett likens cash to oxygen—never thought about when present