To get the most out of your taxes, consider hiring a CPA—he or she will be able to find things beyond this list that you probably would have overlooked.
Contributions To Charity (Out-Of-Pocket)
Sure, it’s not hard to miss a lot of big charitable donations you’ve made throughout the year, but even the little things can add up to big numbers.
“Little things” in this case would include paper plates and other things you donate to a nonprofit’s soup kitchen, or perhaps ingredients for food you prepare for that nonprofit.
You can even deduct 14 cents per mile from your trips to and from charities.
Reinvested Dividends
Many taxpayers miss this one. This may not qualify as a “tax deduction”, per se, but it is a subtraction that can be very beneficial financially.
If you are an investor and have mutual fund dividends that are being invested in extra shares automatically, there’s something you need to keep in mind: each reinvestment raises your “tax basis” in the mutual fund or stock. When you sell your shares, your taxable capital gain is reduced.
So, if you forget to include the reinvested dividends in your cost basis, you’re overpaying your taxes.
State Taxes You Paid Last Year
If you owed taxes when you filed your 2019 tax return in 2020, then you can include that amount as part of your state tax itemized deduction. Also, be sure to include any state income taxes withheld from your paychecks. Quarterly estimated payments count as well.
Child & Dependent Care Tax Credit
Tax credits are better than tax deductions for one big reason—they lower your tax bill dollar for dollar, as opposed to a mere deduction which reduces the overall amount of income that can be taxed.
If you pay your child care bills through something like a reimbursement account at work, it can be easy to overlook the CDCC.
Don’t let this one slip through the cracks—take advantage of it if you can.
Did Your First Job Rack Up Some Moving Expenses?
While job-hunting expenses that you incur while searching for your first job can’t be deducted, moving expenses can be.
What’s even better is that you can take advantage of this write-off even without itemizing.
For instance, if you moved more than 50 miles, 23 cents per mile can be deducted. Parking tolls and fees can also be deducted.
Now, keep in mind—in 2018, they made it so that moving expenses can’t be deducted for federal taxes with an exception, that being if you’re in the military and had to move due to military orders.
Student Loan Interest
Whether you or someone else paid this, there is a way you can write this off.
In the past, no one got a tax break unless the student and parent were liable for the debt. Today, however, there’s an exception.
You’re eligible to take a deduction even if someone else paid back the loan—effectively, the IRS sees this as them giving you the money and you then paid the debt.
If you are a student and you’re not claimed as a dependent, you can qualify for a deduction of up to $2,500 of student loan interest—it doesn’t matter who paid it.