9 Tax Deductions And Credits That May Help You Save Money
Gearing up for tax season? We know, we’d normally be shivering with terror, too. But we discovered a little bit of exciting info that we think might excite you, too. Deductions are expenses that you already paid for that can then be removed from your income so that the total amount you owe taxes on is less. On the other hand, you may also be able to claim tax credits which lower your tax bill, saving you even more. Here are a few overlooked tax deductions and credits that could save you some cash every tax season.
1. Medical Expenses
Though the co-pay for your recent dermatologist visit isn’t deductible, the IRS does recognize spending a certain percentage of your income on health care. For tax year 2018 (filed in 2019), you can deduct premium medical expenses that exceed 7.5 percent of your annual gross income (AGI) as itemized deductions whether you get health insurance through an employer or the health care marketplace. So save those receipts from every appointment!
Make a note now: The percentage you can deduct is now back up to 10 percent (what it was in 2017) for 2019, and this will be reflected when you file your taxes in 2020.
2. Charitable Contributions
A charitable contribution is when you give cash or assets (like stock or property) to a qualifying charitable organization. The IRS considers a “gift” different though. Gifts aren’t usually tax deductible, but charitable contributions are. You can typically deduct the amount that the contribution is worth, but only up to 60 percent of your AGI. For example, let’s say your AGI is $20,000. You can only deduct charitable contributions that equate to less than 60 percent of your $20,000 AGI, which would be $12,000.
Now, if you’re itemizing your deductions, AKA, not taking the standard deduction of $12,000 if you’re single or $24,000 if you’re married and filing jointly, then you’ll need to get and keep receipts from the organizations for charitable contributions that exceed $250. And if you donate non-cash items worth more than $500, you’ll need to fill out a special tax form, too. If you drove your car for charity, you may also be able to deduct 14 cents per mile, as well as other travel costs associated with the volunteer work, too.
If you’re not sure if you can deduct your charitable contribution, the IRS can help you figure it out. There may be a few more details you’ll need to know about your charitable contributions depending on your situation, but these are the basics. Consult a tax professional if you need more help.
3. College Tuition And Expenses
If you’re a full- or part-time college or graduate student, you may be eligible to receive a tax deduction on your tuition and fees, as well as a tax credit. Under the American Opportunity Tax Credit, students enrolled in the first four years of a higher education degree can claim a tax credit of up to $2,500 per year, which then reduces the amount of taxes they owe. If the tax credit reduces your tax liability to $0, you can then claim up to 40 percent of the remaining tax credit up to $1,000.
However, in order to be eligible for the full credit, your AGI must be $80,000 or less, if you’re single, or $160,000 or less, if married and filing jointly. You may be able to claim part of the credit if you’re single and have an AGI of $90,000 or less, or married and filing jointly with a combined AGI of $180,000.
Under the Lifetime Learning Credit, all eligible students can receive a tax credit of up to $2,000 per year and you don’t need to be in the first four years of a higher education degree. In order to be eligible for the full credit, your AGI cannot exceed $66,000 if you’re single, or $132,000 if you’re married and filing jointly. You may be able to claim part of the credit if you’re single and have an AGI between $56,000 and $66,000, or married and filing jointly with a combined AGI between $112,000 and $132,000.
You should receive a 1098-T form from your college or university (check online in your student portal), which can help you claim both of these credits.
4. Jury Duty Pay Given To Your Employer
When you’re summoned for jury duty and your company is willing to pay your full salary while you serve your time, your organization may require you to turn over your jury pay. If you earned $100 in jury duty pay, for example, and your employer demands that you pay them the $100 in return for paying your normal wages throughout your time as a juror, you could deduct that $100 from your taxable income.
5. Damaged Items
If your home or belongings were damaged, and insurance either didn’t cover those losses or didn’t cover the entire cost of the losses, you may be able to deduct the costs of replacing everything. The catch? Your losses must have occurred in an event or area that the president has deemed a “disaster.”
6. Student Loan Interest
If you pay student loans every year, you can deduct part of the interest you pay on those loans. The tax deduction can be applied to both federal and private student loans, too. If you’re eligible, you can deduct up to $2,500 on your taxable income. In order to be eligible for the tax deduction, you must be single and make an AGI of no more than $80,000, or married and filing jointly with a combined AGI of no more than $160,000. Your lender should send you a 1098-E form to help you understand if you’re able to claim this deduction or not.
7. Educator Expenses
If you’re a teacher and spent $250 or less out of your own pocket for certain school supplies, classroom or other job-related expenses, you may be able to deduct that amount from your taxes.
8. Electric Vehicles
If you purchased an electric vehicle with four wheels that weighs less than 14,000 pounds and draws energy from a battery in or after the year 2010 and still drive it, you may be able to claim a tax credit that ranges from $2,500 to $7,500, depending on the capacity of the battery. If you purchased an electric vehicle with three wheels that draws energy from a battery in 2012 or 2013, you may be able to claim a tax credit worth 10 percent of the purchase price up to $2,500.
9. Mortgage Interest And Property Taxes
If you own your home (you go girl!) you may be able to deduct the interest you pay on your mortgage and the taxes you pay on your property every year. You can deduct mortgage interest up to a total of $750,000 per year, while you can only deduct up to $10,000 in property taxes per year. This $10,000 total includes state and local income and property taxes that you pay as a homeowner.
Tax season can be a rewarding experience if you file yours the right way. Between tax deductions and credits, you could end up with more money back in your pocket than you thought.
Always consult a tax professional or financial advisor for guidance and advice when it comes to your money and taxes.