The Most Commonly Over-Looked Tax Breaks Everyone Should Know
Paying tax is something that most of us dislike but know that it’s mandatory. However, are you aware of the different tax breaks that are available?
Because tax can be a boring subject, most people just go through the motions. Tax laws do change regularly, so it can be confusing to keep track of what applies to you.
If your situation has changed in the past few years, you may be missing out on some valuable tax breaks. That means more money in your pocket and less going to the IRS, which sounds good to us.
If you want to know which tax breaks, you’re eligible for before you file your taxes, read on.
What Deductions are Available?
It depends on your individual situation, but the following are common tax breaks that people miss out on:
- Tax deductions due to medical and / or dental expenses
- Charitable deductions
- Getting relief on your gambling losses
- Credit for dependants and childcare
- Deductions for a home office
What Tax Breaks Could You be Eligible for?
If you have a lot of medical bills, you can deduct anything that is more than 7.5% of your income. That means if you earn $40,000 then anything you pay over $3,000 is tax deductible.
It’s also worth noting what counts as a medical expense:
- Payments to chiropractors and non-traditional medical practitioners
- Prescription drugs to alleviate nicotine withdrawal or help with cessation of smoking
- Payments for transport to reach any medical care, such as trains and taxis
- Payments for insurance policies for long-term medical care, if not paid by your employer
- The cost of a service animal to help visually or aurally impaired
There are many things which people don’t think would be covered but are. It’s worth checking the topic on the IRS page to find out more.
Cosmetic surgery is not considered a deductible expense.
If you believe you qualify for a tax break for your charitable deductions, then you need to itemize the contribution.
However, The Coronavirus Aid, Relief and Economic Security (CARES), enacted in 2020, lets you deduct up to $300 without itemization. Some rules apply:
- It must be a cash donation
- It must have gone directly to the charity, not to a fund
If you drove your car for any charitable reason during the tax year, you can also claim. You can deduct 14 cents per mile, and any parking or tolls paid.
If you made a contribution of more than $250, make sure you get an acknowledgement from the charity. Then itemize it to ensure you get the tax break.
Relief on Gambling Losses
The saying, “keep your receipts” probably doesn’t ring in your ears when you’re betting. However, it should.
Deductible gambling losses can include the following:
- Lottery tickets
- Casino losses
- Racetrack losses
- Raffle tickets
You need to itemize to claim this tax break and include dates. It’s important to keep all the details for the IRS.
Credit for Dependents
There are a few tax breaks for those who have dependents. The first is childcare.
To qualify, you must have:
- Children under 13
- Paid for care while you work, or look for work
The care can be in or out of the home, and you may be eligible for 35% – 50% of $3,000 for one child. Elderly parents can also be listed as dependents.
Home Office Expenses
As many more people work from home, this has led to increased spending for home offices. However, deductions do not apply if you are employed and work from home for your employer.
If you are self-employed and work from home, you can deduct a percentage of your rent or mortgage interest. The maximum deduction is $1,500 for 300 square feet of your home used for workspace.
Check Before Filing
The fact is that millions of people are missing out on tax breaks that could help them. Make sure you’re up to date with new tax laws and see if you’re missing out.