When it comes to your tax return, the deductions you claim can greatly affect your refund. Unfortunately, if you’re like many tax filers out there, you fail to claim appropriate deductions on a yearly basis.
Wondering what deductions you might be missing? Then read on. Here are four tax deductions most people forget about.
1. Student Loan Interest
Do you make monthly payments towards student loans? If so, you’re likely paying interest on those loans. If that’s the case, you should be deducting that interest on your tax return. You can deduct up to $2,500 worth of student loan interest every year.
Note that you don’t need to have paid the interest yourself in order to deduct it. Let’s say that your parent paid the interest for you. As long as they don’t claim you as a dependent on their taxes, you can still deduct that interest from your tax return.
2. Small Charitable Donations
You’re likely aware that you can deduct charitable donations from your taxes. However, you might be under the impression that only large donations can be deducted.
In truth, though, every cent you contribute to charity is deductible. Did you give $5 each to a handful of non-profit organizations? Add it all up and deduct it. Just be sure to keep documentation of each transaction.
3. Medical Expenses
Did you have extensive medical work done? Did the cost of that medical work exceed 7.5% of your adjusted gross income? If so, you can deduct some of it from your taxes.
Note that this only involves the money that you paid. It doesn’t involve the money that your insurance company paid.
Let’s say that your adjusted gross income is $45,000 and that you racked up $8,000 in medical expenses.
You’re allowed to deduct anything that exceeds 7.5% of your AGI. In this case, 7.5% of your AGI would be $3,375. Subtract that from $8,000 and you’ve got a $4,625 deduction you can claim.
4. Earned Income Tax Credit
In 2018, 22% of those eligible for it didn’t claim the earned income tax credit. This is a huge mistake for these individuals, as this credit reduces your tax burden dollar-for-dollar.
Designed for low- and moderate-income earners, this tax credit can save you anywhere from a few hundred to a few thousand dollars on your taxes. So, when doing your taxes this year, keep it in mind. If you need help claiming it, hire a tax advisor.
Claim All the Right Tax Deductions With the Help of a Tax Planning Company
As you can see, there are a number of tax deductions that you could be overlooking. In truth, there are many more than these. So, if you want to be sure to claim all that you’re eligible for, you should strongly consider a tax planning company.
Looking for financial planning services in North County San Diego? Look no further than Pacific Tax & Financial Group.
Contact us now to discuss your tax planning needs!