What are a few items people tend to miss when they do their taxes, whether filling out their tax form themselves or using a tax software?
Medical expenses (if they are significant). The IRS allows you to deduct unreimbursed expenses for preventative care, treatment, surgeries, and dental and vision care as qualifying medical expenses. You can also deduct unreimbursed expenses for visits to psychologists and psychiatrists. Unreimbursed payments for prescription medications and appliances such as glasses, contacts, false teeth and hearing aids are also deductible.
The IRS also allows deductions for expenses that you pay to travel for medical care, such as mileage on your car, bus fare and parking fees.
Student loans. If you have student loans from college, you can deduct the associated loan interest up to $2,500. You can also deduct tuition and fees up to $4,000 if the total amount is greater than 2% of your adjusted gross income. Also, check to see what if any education credits are currently offered such as the Lifetime Learning Credit in the American Opportunity credit.
Dependent care. If you have a child under 13 years of age or a spouse either of which is mentally or physically incapable of self-care you may qualify for the Child and Dependent Care Credit. Total benefits are a maximum of $6,000 for two dependents under the guidelines but review the documentation to see if you qualify since it can help offset expenses incurred from taking care of a loved one.
Charitable deductions up to $600 for this year. The CARES Act passed in 2020 created an above-the-line charitable contribution deduction for taxpayers, even if they don’t itemize deductions this applies to tax years 2020 and 2021. Up to $300 for individuals and $600 for taxpayers married filing jointly are allowed. The donations can only be cash, not in-kind.
Contributions to a qualified Individual Retirement Account or employer sponsored retirement plan. Most people know that contributions to a qualified retirement plan are tax-deductible and lower your adjusted gross income which reduces your tax burden. However, there are also additional benefits such as the Retirement Savings Contribution Credit or Savers Credit which allow you to claim a 50% credit if certain qualifications are met based on income and age.
If you have questions or need help filing your taxes this year, let us give you a hand! Contact us!
Jonathan Medows is a certified public accountant licensed in New York, New Jersey, Maryland, and Pennsylvania. He is also a recognized expert in taxation for freelancers and the self-employed—often tapped for his expert knowledge and perspective on self-employment taxation by national and regional publications such as The New York Post, BusinessWeek, Forbes taxation blog, WebCPA, CPA Practice Advisor, and others. You can read some of Jonathan’s press coverage here.
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