Tax season can be stressful, but knowing what deductions you're eligible for can make a significant difference in your refund or tax liability. Many taxpayers miss out on valuable deductions simply because they don't know they exist or how to claim them properly.
1. Home Office Deduction
If you work from home, you may be able to deduct a portion of your home expenses, including mortgage interest, property taxes, utilities, and maintenance costs. The key is that the space must be used regularly and exclusively for business purposes.
Pro Tip:
Use the simplified method for home office deduction: $5 per square foot of home office space, up to 300 square feet (maximum $1,500 deduction).
2. Charitable Contributions
Donations to qualified charitable organizations are deductible. This includes cash donations, property donations, and even mileage driven for charitable purposes. Keep detailed records of all contributions, including receipts and acknowledgment letters.
3. Medical and Dental Expenses
Medical expenses that exceed 7.5% of your adjusted gross income (AGI) are deductible. This includes doctor visits, prescription medications, medical equipment, and even travel expenses for medical care.
4. State and Local Taxes (SALT)
You can deduct up to $10,000 in state and local taxes, including property taxes and either state income taxes or sales taxes. This deduction is particularly valuable for residents of high-tax states.
5. Student Loan Interest
You can deduct up to $2,500 in student loan interest, even if you don't itemize deductions. This deduction phases out for higher-income taxpayers but can provide significant savings for recent graduates.
6. Educator Expenses
Teachers and other educators can deduct up to $300 in unreimbursed classroom expenses, including books, supplies, and computer equipment. This deduction is available even if you don't itemize.
7. Job Search Expenses
If you're looking for a job in your current field, you can deduct expenses like resume preparation, travel to interviews, and employment agency fees. These expenses must exceed 2% of your AGI to be deductible.
8. Investment Expenses
Investment-related expenses, including advisory fees, safe deposit box rentals, and investment publications, may be deductible. However, these expenses are subject to the 2% AGI floor and are no longer deductible for tax years 2018-2025 due to the Tax Cuts and Jobs Act.
9. Gambling Losses
You can deduct gambling losses up to the amount of your gambling winnings. This includes losses from casinos, lotteries, and other gambling activities. Keep detailed records of all gambling activities.
10. Hobby Expenses
If you have a hobby that generates income, you can deduct expenses up to the amount of income earned. However, hobby expenses are subject to the 2% AGI floor and are no longer deductible for tax years 2018-2025.
Important Note:
Tax laws change frequently, and some deductions may not be available in all years. Always consult with a qualified tax professional to ensure you're claiming all eligible deductions and following current tax laws.