Tax Deductions and Credits You Shouldn’t Miss

It’s tax season again! The time when many taxpayers find themselves wondering how to reduce their tax bill and maximize their refund. One of the easiest ways to do this is by taking advantage of tax deductions and tax credits. Here are 10 common deductions and credits you should know about:

1. Student Loan Interest Deduction

If you’re paying off student loans, you may be eligible to deduct up to $2,500 of the interest you paid during the year. This deduction applies even if you don’t itemize your taxes, but there are income limitations to be able to take the deduction, making it a great option for recent graduates.

2. Mortgage Interest Deduction

Homeowners can deduct the interest paid on mortgages of up to $750,000 ($1 million if the loan originated before December 16, 2017). This deduction is particularly helpful for reducing tax liabilities for those with significant mortgage payments.

3. Charitable Contributions

Donations to qualified charities are tax-deductible. This includes monetary gifts, as well as non-cash donations like donations of clothing and household items. Be sure to keep receipts and records of your contributions.

4. Medical and Dental Expenses

If your unreimbursed medical and dental expenses exceed 7.5% of your adjusted gross income (AGI), you can deduct the amount above this threshold. Eligible expenses include prescriptions, doctor visits, and even some home improvements for medical needs.

5. State and Local Taxes (SALT)

You can deduct up to $10,000 ($5,000 if married filing separately) in state and local income, sales, and property taxes.

6. HSA Contributions

After-tax contributions to a Health Savings Account (HSA) are tax deductible. The amounts contributed grow tax-free and distributions are not taxable if used for qualified health care costs.  To contribute to a HSA, you must be covered by an HSA-eligible high deductible health plan.

7. Educator Expenses

Teachers and eligible educators for kindergarten through twelfth grade can deduct up to $300 for classroom supplies purchased out of pocket. If both spouses are eligible educators and file jointly, the maximum deduction doubles to $600.

8. Child and Dependent Care Expenses

Working parents can claim a deduction for childcare expenses. This includes daycare, after-school programs, and even in-home care for dependents under 13. The credit can cover up to 35% of qualifying expenses, depending on income.

9. Home Office Deduction

If you work from home and use part of your home exclusively for business, you may qualify for a home office deduction. This deduction is no longer available to employees, but if you are self-employed with a home office you may be eligible for this deduction.

10. Home Energy Credits

If you upgrade your primary residence with energy efficient exterior doors, windows, central air conditioners, water heaters, furnaces, heat pumps or solar panels you may qualify for the Energy Efficient Home Improvement Credit or the Residential Clean Energy Credit.

Next Steps

To make the most of these deductions and credits, keep thorough records throughout the year. Save receipts and track expenses.

The questions at the beginning of the tax organizer I provide to you each year help uncover if you’re eligible for any of these deductions and credits, so be sure to go through them while gathering your tax documents. If you have questions or need personalized advice, contact me today—I’m here to help!