10 Tax Deductions and Credits You’re Probably Overlooking
Did you move in the past year? You might be able to deduct it. We talked to two experts to turn up some commonly missed deductions (just be sure to check with an expert first to make sure they apply to you).
1. Child and Dependent Care Credit
If you’re working or job-hunting, you might be able to claim the Child and Dependent Care Credit for childcare costs (for kids under 13 and other qualifying dependents). This includes summer camp! You don’t have to use a licensed provider, but you do need to identify the provider on your tax return—something he or she may not want, says Cindy Hockenberry, the research manager for the Tax Knowledge Center. Depending on your income, you can save up to $1,050 for one child and up to $2,100 for two or more.
2. Your Friend
If you’ve had a friend crashing on your couch for the past year, you may be able to claim a deduction up to $3,950. Here are the rules: You have to provide more than half of their support, they have to live with you for the whole year, and they can’t make more than $3,950 in taxable income. It might seem like a stretch, but some people are surprised to find out their live-in boyfriend or girlfriend qualifies, says Lisa Greene-Lewis, a CPA and expert for Turbo Tax.
3. Personal Property Taxes
Annual personal property taxes (such as taxes for a boat or car) are deductible—something many people don’t realize, according to Greene-Lewis. While it may have been a large bill to pay, at least you can claim it.
4. Moving Expenses
Moving is expensive. The good news? If you relocate for a new job, those expenses may be deductible. “To qualify, you need to move at least 50 miles away from your old home, and you’ll need to work at your new job for at least 39 weeks during the first 12 months after your move,” says Greene-Lewis. If you do qualify, things like movers, storage units, tolls, and lodging could be covered.
5. Medical Expenses
If you’ve spent more than 10 percent of your adjusted gross income on medical expenses (7.5 percent if you’re 65 or older) during the year, you may be able to claim that chunk of change when you file your taxes. In some cases, travel expenses are even included for you and a companion.
6. Out-of-pocket Charitable Contributions
“You’re never allowed to deduct the value of your time, but you can generally deduct out-of-pocket costs,” says Hockenberry. The trick is to keep detailed records. Some deductible examples include ingredients for pies you made for a charity, materials you used to make blankets for a homeless shelter, or stamps you bought for a fundraising event, Greene-Lewis says.
7. Earned Income Tax Credit
The EITC is a huge benefit for families who are eligible for it. Depending on your income and family size, it could mean a bonus of up to $6,143. “One in five taxpayers who qualify don’t claim it,” says Greene-Lewis. “Some don’t know they qualify and some have an income that falls below the IRS threshold for filing taxes, and you must file to receive the credit.”
8. Gambling Expenses
“With this claim, the best you can expect is a wash, but at least it’s something,” says Hockenberry. You’re required to report gambling winnings as income and pay taxes on them, but you can then claim gambling expenses/losses that don’t exceed your winnings as a deduction. As with other tax matters, save any receipts, tickets, and statements as backup.
9. Investment-related Expenses
Maybe you have a safety deposit box that costs a fee, or a broker who manages your IRA. Those investment-related expenses are tax-deductible, Hockenberry explains. And don’t forget to claim the money you spent last year on tax preparation software or an accountant who prepared your taxes.
10. Retirement Savings Contributions Credit
Depending on your income, the money you’ve socked away for retirement may get you a credit of up to $1,000. Qualifying money includes contributions you (not your employer) made to traditional and Roth IRAs, employer-sponsored 401(k) plans, savings incentive match plans for employees (SIMPLE), 403(b) programs, governmental 457 plans, and salary reduction simplified employee pensions (SEP). The credit is based on a scale that particularly benefits lower-income earners, says Hockenberry.