Tax season can be stressful, especially when you’re unsure if you’re maximizing your deductions. Many taxpayers leave money on the table by overlooking valuable tax deductions. Whether you’re an individual or a business owner, understanding these deductions can make a significant difference in your tax liability. Here are 10 commonly overlooked deductions to help you save money this tax season.
1. State Sales Taxes
For those living in states without an income tax, such as Florida, Texas, or Nevada, the state sales tax deduction can be a game-changer. You can choose to deduct either state and local income taxes or sales taxes. If you made big-ticket purchases like a car, boat, or major home renovations, those sales taxes can add up and might make this deduction more beneficial. Use the IRS Sales Tax Calculator to ensure accuracy.
2. Reinvested Dividends
If you’re reinvesting dividends from stocks or mutual funds, don’t forget to adjust your cost basis. Each reinvestment increases your tax basis, which reduces your taxable gain or increases your deductible loss when you sell. Many investors overlook this, costing them money unnecessarily.
3. Out-of-Pocket Charitable Contributions
While most people remember to deduct large donations, small charitable expenses often go unnoticed. Costs like ingredients for meals prepared for charity events, stamps for school fundraisers, or the miles driven for charitable work (14 cents per mile) can all be added to your total charitable contributions.
4. Student Loan Interest Paid by Others
If someone else pays your student loan, the IRS considers it a gift to you, and you can still deduct up to $2,500 in interest paid. This deduction applies as long as you’re not claimed as a dependent on someone else’s tax return.
5. Moving Expenses for Military Personnel
While moving expense deductions were eliminated for most taxpayers in 2018, active-duty military personnel can still claim this deduction if their move is permanent and ordered by the military. Eligible expenses include travel, lodging, and shipping household goods, pets, and vehicles.
6. Child and Dependent Care Credit
The Child and Dependent Care Credit offers significant savings for working parents. You can claim up to $6,000 in childcare expenses for two or more children, minus the $5,000 allowed through employer reimbursement accounts. This credit reduces your tax bill dollar for dollar and is especially helpful for lower-income households.
7. Earned Income Tax Credit (EITC)
The EITC is a refundable credit designed for low- to moderate-income workers, yet 25% of eligible taxpayers fail to claim it. The maximum credit ranges from $632 to $7,830, depending on your income, filing status, and family size. Even if you owe no taxes, you can still receive a refund by filing a tax return.
8. Refinanced Mortgage Points
When you refinance a mortgage, you must deduct points over the life of the loan. However, when you sell the property or refinance again, any remaining points can be deducted in full. Many taxpayers miss this deduction, especially if they refinance multiple times.
9. Jury Duty Pay Given to Employers
If your employer continues paying your salary while you serve on a jury and asks you to turn over your jury duty pay, you can deduct that amount from your taxable income. This prevents you from being taxed on money that merely passes through your hands.
10. Startup Costs for New Businesses
Entrepreneurs often overlook the deduction for startup expenses incurred before officially launching their business. You can deduct up to $5,000 in your first year for costs like market research, advertising, and professional services. These deductions can significantly offset initial business costs.
Conclusion
Maximizing your tax deductions is an essential step in reducing your tax liability and keeping more money in your pocket. From state sales taxes to startup costs, these 10 commonly overlooked deductions can make a significant difference for individuals and business owners alike. Staying informed and consulting with a tax professional ensures you’re taking full advantage of these opportunities, saving money, and setting yourself up for financial success.
Don’t leave money on the table this tax season! Let Martinez Income Tax help you uncover every deduction you deserve. Whether it’s state sales taxes, startup costs, or other commonly missed deductions, our experts are here to maximize your savings and minimize your tax liability. Contact us today for personalized, professional tax services.
