lifehacker.com
With the April 15 deadline right around the corner, you want to ensure you're taking advantage of all the deductions you can. Andy Phillips, Vice President of H&R Blocks Tax Institute, says his tax experts are getting plenty of questions from filers looking to maximize every deduction available to them. I wrote about some wacky and unexpected tax deductions last week, but what about the most common ones that filers just don't fully understand? From gig worker perks to retirement contributions, here are the tax deductions every filer needs to know.Retirement contributions and traditional IRA deductionsPhillips says that if you contribute to a tax-advantaged traditional retirement account (IRA, 401(k), etc.), you may owe less tax than if you didnt contribute. With a 401(k), you might not even realize youre receiving an exclusion if you have your contribution automatically made in conjunction with your paycheck. The money comes out before the taxes do, resulting in a reduction of your taxable income.With a traditional IRA, you can still get a tax deduction without requiring access to an employer plan. However, your tax break may be limited if you also participate in an employer plan. For self-employed taxpayers, SEP IRA and SIMPLE (Savings Incentive Match Plan for Employees) IRA contributions are above the line tax deductions. See the other self-employed deductions below.Self-employment expensesAs side hustles become ever more popular, its no surprise that self-employment expenses are more common. For example, if you pay for your own qualified health insurance, that may count as an above the line deduction. Also, you can deduct half of your self-employment tax above-the-line.On top of that, Phillips reminds filers you can deduct business expenses like internet costs, office supplies, advertising, and business travel from your business income. And, for qualifying individuals, you can take the home office deduction.Student loan interestPhillips reminds filers with student loan debt that you can deduct some or all of the interest you paid that year for a qualified student loan. In fact, federal student loan borrowers could qualify to deduct up to $2,500 of student loan interest per tax return per tax year. You can claim the student loan interest tax deduction as an adjustment to incomeyou dont need to itemize deductions to claim it.Charitable contributionsYou will need to itemize your deductions if you want to deduct your charitable donations. "Many people find it worth itemizing these deductions," says Phillips, "particularly if you give regularly to a church or other charity."Its also possible to deduct the current fair market value of goods you donate to charity. Make sure you get a receipt for your donations, whether they are cash or goods. And dont forget to keep track of your mileage if you drive on behalf of a charity; thats tax-deductible, too.Your kidseven newborns?You can claim all qualifying children that were born or adopted within the tax year you are filing. Even if your child was born on Dec. 31, your child may be able to be claimed as a dependent on your taxes. However, Phillips clarifies that if your child is born after Dec. 31, even though your pregnancy lasted most of the tax year, youll have to wait until you file the next years return to claim them. To be your qualifying child, the child must: Be related to you as your child, foster child, sibling, half-sibling, step-sibling, or descendant of any of them; Be under age 19, a full-time student under age 24, or permanently and totally disabled; Not provide more than half of the childs own total support; and Live with you for more than half of the year they were alive. Not be filing a joint return with a spouse unless its to claim a refund of income tax withheld or estimated payments If you are a dependent whos earning income, good newsyour parents can still claim you as a dependent so long as other dependent rules still apply. Your earned income doesnt go on their return. Filing tax returns for children is easy in that respect. However, you may need to report it on your own tax return.What can't you deduct from your taxes?While you're searching for all the possible deductions out there, you're going to hit a few roadblocks.Commuting costsUnfortunately, commuting costs are not tax deductible. Commuting expenses incurred between your home and your main place of work, no matter how far, are not an allowable deduction.Costs of driving a car from home to work and back, again, are personal commuting expenses. This is also true for fares you pay to ride any sort of public transportation to and from work.Phillips points out, though, that if you are a member of a reserve component of the Armed Forces and travel more than 100 miles away from home in connection with the performance of services as a member of the reserves, you can deduct your qualified travel expenses.Your cat's vet billsUnfortunately, deducting medical expenses for pets is not allowed as a medical expense on your tax return. Phillips says the only exception would be when an animal is a certified service animal, like a guide dog, to assist you. Service animals generally arent considered pets, though.If you have a physical disability or are hearing or visually impaired, you can deduct medical expenses for your pets if they are certified service animals.Expenses that may be covered include purchasing, training, and maintenance of the animal which includes food, grooming, and medical care.Remember to keep accurate records and consult with a tax professional if you have any questions or concerns. By taking advantage of these deductions, you can potentially lower your tax liability and keep more of your hard-earned money.
