Taxpayers who itemize their deductions often stand to get a better return come tax season, but only if they’re smart about their deductions. It’s important to keep good records, but it’s also important to know what counts as a tax deduction. Read on to find out about five of the most commonly overlooked tax deductions to prepare for the upcoming tax season.
For the 2019 tax year, taxpayers can deduct any medical expenses that exceed 10% of their adjusted gross income. Most people realize that money spent on doctor’s appointments and medications can be deducted, but few go the extra mile to deduct travel expenses, home improvements completed for medical reasons, long-term care insurance, and treatments like smoking-cessation programs and acupuncture. The new system for tax deductions is more complicated than ever, so find information at bswllc.com about what are considered tax-deductible under the Tax Cuts and Jobs Act.
Qualified Business Income
The qualified business income deduction was only recently added to Americans’ roster of money-saving deductions. It allows those self-employed individuals who own pass-through businesses to deduct 20% of their business income from personal taxes. Only individuals with a yearly income of $157,000 or married couples filing jointly with a shared annual income of $315,000 are eligible for this deduction.
There are some additional limitations self-employed business owners need to know about, as well. For one thing, service-based professions are typically excluded. Self-employed taxpayers may want to seek assistance when filing their taxes if they want to take advantage of this particular tax write-off.
Non-Cash Charitable Giving
Most taxpayers know that they can claim a deduction for cash gifts to charitable organizations. Not all of them realize that they can also deduct other, non-cash forms of charitable gifts, though. These include donations to local thrift stores, expenses incurred while performing volunteer work, mileage to and from volunteer activities, and more. Just keep in mind that personal expenses incurred while performing volunteer work, such as stopping for lunch in the middle of the day, are not deductible.
Working parents can claim the child and dependent care tax credits. They can claim deductions for daycare, day camps, and other forms of child care. Make sure to have proper documentation of expenses related to child care, though, as taxpayers are expected to be able to justify these deductions in the unlikely event of an audit.
Although no gambler likes to lose, the monetary losses incurred at casinos do come with at least one advantage. They’re deductible. Gambling losses include losses suffered not just at casinos, but also at racetracks, bingo games, raffles, and even money spent on losing lottery tickets.
Those who love to gamble should keep daily diaries of their activities, including the names and locations of the casinos they visit, the amount of money won or lost, and the date and type of wagering. They should also keep gambling receipts such as losing lottery tickets.
The Bottom Line
Whether consumers are looking forward to getting a hefty tax return next year or they work for themselves and want to minimize the amount of money they have to pay to the government, it’s important to be smart about deductions. The five deductions listed above are just a few of many that today’s taxpayers overlook. When in doubt about a potential tax break, it’s always best to ask a professional accountant.