Phillips says that if you contribute to a tax-advantaged traditional retirement account (IRA, 401(k), etc.), you may owe less tax than if you didn’t contribute. With a 401(k), you might not even realize you’re 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.
Self-employment expenses
As side hustles become ever more popular, it’s 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.
Phillips 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 income—you don’t need to itemize deductions to claim it.
Charitable contributions
It’s 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 don’t forget to keep track of your mileage if you drive on behalf of a charity; that’s tax-deductible, too.
To be your qualifying child, the child must:
Be under age 19, a full-time student under age 24, or permanently and totally disabled;
Live with you for more than half of the year they were alive.
If you are a dependent who’s earning income, good news—your parents can still claim you as a dependent so long as other dependent rules still apply. Your earned income doesn’t 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?
Unfortunately, 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.
Your cat's vet bills
Unfortunately, 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 aren’t 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.
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