20 Tax Breaks You Might Be Missing Out On
Learn your tax and gain more from it than lose.
- Cyra Sanchez
- 6 min read
Some taxpayers fail to take deductions for things like student loan interest, medical expenses, and home office costs. Making use of lesser-known credits, such as the Earned Income Tax Credit or energy-efficient home improvements, could save you a bundle. Careful tax planning helps you achieve maximum refunds and lower liabilities.
1. State Sales Taxes
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If your state does not have an income tax, fear not. You can still deduct sales taxes. This is useful especially if you purchased a large ticket item such as a car or boat and paid a lot of sales tax. So that deduction will leave you with more cash in your pocket.
2. Reinvested Dividends
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Just because you never touched those dividends doesn’t mean they’re not working for you. Reinvested dividends will add to your investment’s cost basis, reducing taxable capital gains later on. Tracking these is important to avoid overpaying taxes for your investments.
3. Out-of-Pocket Charitable Contributions
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Donating is not all big dollar checks, everything flowing from your pocket when you do work on your own time matters. Supplies, transportation, and even baking cookies for a fundraiser could be deductible. Keeping receipts ensures you make the most of this often-overlooked deduction.
4. Student Loan Interest Paid by Parents
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As far as the IRS is concerned if you have money, even if you don’t, it considers your parents as giving money to you first. It means that if you aren’t a dependent, you can deduct interest on student loans up to $2,500. This is a fantastic opportunity for grads to snag some additional tax breaks.
5. Child and Dependent Care Credit
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If you pay for childcare so you can work, you may qualify for a credit that covers up to 35 percent of costs. That includes daycare, nannies, and summer camps. Unlike deductions, this credit reduces your tax bill dollar-for-dollar. So it can mean money back in your pocket.
6. Earned Income Tax Credit (EITC)
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If you have low to moderate income, you could be missing out on money by not claiming this credit. In particular, the EITC can mean thousands of dollars returned to households, especially people with children. It’s a commonly overlooked one, so be sure to go through the eligibility checklist before filing.
7. State Tax Paid in Previous Year
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Did you pay state taxes last year and failed to deduct them? If you owed them and paid them this year, you can claim them on your federal return. Tracking those payments means you won’t miss out on a simple deduction.
8. Jury Duty Pay Given to Employer
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If your employer paid you your salary while you were assigned to jury duty, but mandated that you give them your jury duty pay, you can write that (the amount you were paid) off. Otherwise, you would be taxed on funds you didn’t actually possess. This little-known deduction keeps things balanced.
9. Medical Expenses
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You can also deduct your medical expenses if they exceed 7.5% of your adjusted gross income. It covers things like doctor visits, prescriptions, and some travel costs to receive medical care. However, keeping good records of out-of-pocket expenses can lead to a big tax break.
10. Mortgage Points
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Did you pay extra points at closing to buy down your mortgage rate? You might be able to deduct them gradually or all at once if some requirements are met. This deduction not only saves taxes today but also lowers future interest costs.
11. Retirement Savings Contributions Credit (Saver’s Credit)
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Are you saving for retirement? You may be eligible for a credit worth up to 50 percent of your contributions. This allows low and middle-income earners to grow their retirement nest egg while minimizing their tax bill.
12. Self-Employment Taxes
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Are you self-employed? You do not, however, pay the employer portion of Social Security and Medicare taxes. You pay both, but the employer portion is deductible. This can help counter the additional tax burden of being self-employed.
13. Home Office Deduction
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If you work exclusively from home for business, you may qualify for this deduction. You can choose between calculating actual expenses or using the simplified method, which lets you deduct $5 a square foot up to 300 square feet. Either way, it helps with costs like utilities, rent, or mortgage interest.
14. Educator Expenses
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Teachers and qualifying educators can write off up to $250 of classroom costs, for books, supplies, and even professional development. Many teachers are paying far more than that out of pocket, making this a welcome but modest perk. Every cent counts for offsetting expenses.
15. Lifetime Learning Credit
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Are you going back to school? This credit is worth up to $2,000. It’s 20% of up to $10,000 in tuition and fees, per year. Unlike other education credits, there’s no cap on the number of years you can take it, which is great for the lifelong learner.
16. Moving Expenses for Military Members
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If you’re moving because of military orders, moving expenses are tax-deductible for active-duty military personnel. These are transportation, accommodation, and storage expenses. It’s one of the few remaining moving deductions, so use it if you qualify.
17. Gambling Losses
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Dropped some cash at a casino? The IRS permits you to deduct gambling losses, but only to the extent of your winnings. Stay organized, and you won’t be taxed on more than your true profits.
18. Investment Fees and Expenses
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Investment and financial planning fees you pay might also be deductible. These deductions come with a 2% adjusted gross income limit, so they’re especially helpful for higher earners with major investment-related expenses. Keeping those records in detail ensures you’ll make the most of this benefit.
19. Casualty and Theft Losses
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If your property was damaged or stolen in a federally declared disaster, you might be able to deduct the loss. The term encompasses hurricanes, wildfires, and floods. If insurance didn’t pay for all of it, this deduction can help a little.
20. Energy-Efficient Home Improvements
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Are you considering solar panels or energy-efficient windows to upgrade your home? You might be able to take advantage of federal tax credits that reduce your tax burden while greening your home. It is a win-win for your pocket and the planet.