Maximizing Tax Deductions and Credits: Don't Overlook These Opportunities

Reducing your tax liability is a powerful way to boost your savings when managing your finances. Yet, many people miss out on valuable opportunities to lower their tax bills simply because they’re unaware of certain deductions and credits or mistakenly assume they don’t qualify. Let’s explore ten commonly overlooked tax benefits that could help you keep more of your hard-earned money.

1. State Sales Tax Deduction

You can deduct state sales taxes if you live in a state without an income tax. Even if your state does have an income tax, this deduction might still be worth exploring if you made significant purchases, like a vehicle or major home appliances, during the tax year.

Source: IRS Publication 17, Chapter 22

2. Student Loan Interest Paid by Parents

If your parents paid the interest on your student loans, you might still be eligible to claim a deduction of up to $2,500. As long as you’re not claimed as a dependent and meet the income limits, the IRS considers you paid the interest yourself.

Source: IRS Publication 970, Tax Benefits for Education

3. Educator Expenses

Teachers and eligible educators can deduct up to $300 for out-of-pocket classroom expenses. Married educators filing jointly can double this deduction to $600 if both spouses qualify. This is a small but meaningful way to recoup some of what educators selflessly spend on their students.

Source: IRS Topic No. 458, Educator Expense Deduction

4. Job Search Expenses

If you are looking for a new job in your current field, you can deduct related expenses, including resume costs, travel expenses for interviews, and career coaching. However, this deduction doesn’t apply if you search for your first job or transition to a different career.

Source: IRS Publication 529, Miscellaneous Deductions

5. Retirement Savings Contributions Credit (Saver’s Credit)

This credit is a hidden gem, particularly for younger workers. Suppose you contributed to an IRA, 401(k), or other qualifying retirement account. In that case, you might qualify for a credit of up to $1,000 ($2,000 for married couples), depending on your income and filing status.

Source: IRS Form 8880, Credit for Qualified Retirement Savings Contributions

6. State and Local Property Tax Deduction

Many homeowners deduct their mortgage interest but forget about the property tax deduction. You can deduct up to $10,000 ($5,000 for married individuals filing separately) in state and local taxes, including property taxes.

Source: IRS Publication 530, Tax Information for Homeowners

7. Health Savings Account (HSA) Contributions

Contributions to an HSA are tax-deductible, and withdrawals for qualified medical expenses, which include a wide range of health-related costs from doctor visits to prescription medications, are tax-free. Even if your employer contributes to your HSA, you can add up to the annual limit and claim the deduction.

Source: IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans

8. Energy-Efficient Home Improvements

You may qualify for tax credits if you installed energy-efficient upgrades like solar panels or new windows. Thanks to the Inflation Reduction Act 2022, several energy-related benefits have been expanded and extended.

Source: Energy Star Program, IRS Form 5695, Residential Energy Credits

9. Charitable Contributions

Beyond cash donations, you can deduct the fair market value of non-cash contributions like clothing or household items. If you volunteer for a charitable organization, you can also deduct mileage and certain out-of-pocket expenses.

Source: IRS Publication 526, Charitable Contributions

10. Medical Expenses

Medical expenses that exceed 7.5% of your adjusted gross income (AGI), which is your total income minus certain deductions, can be deducted. This includes doctor visits, dental and vision care, medical equipment, and even travel costs related to medical treatment.

Source: IRS Publication 502, Medical and Dental Expenses

Final Thoughts

Maximizing your tax deductions and credits requires awareness, organization, and sometimes professional advice. Keeping detailed records and receipts for all eligible expenses ensures you’re well-prepared to claim deductions and credits. For personalized guidance tailored to your financial situation, consult a tax professional. By staying informed and proactive, you can take control of your taxes and optimize your savings.

Your tax refund might thank you later!

Disclosure

The information provided in this article is for educational and informational purposes only and should not be construed as tax, legal, or financial advice. While every effort has been made to ensure the accuracy of the information presented, laws and regulations may change, and individual circumstances can vary.

This material is not intended to serve as personalized tax, legal and/or investment advice since the availability and effectiveness of any strategy is dependent upon your individual facts and circumstances. Duncan Williams Asset Management  is not a legal or accounting firm. Please consult with your legal or tax professional regarding your specific tax situation when determining if any of the mentioned strategies are right for you.

You should consult with a qualified tax professional, financial advisor, or legal expert to address your specific needs and ensure compliance with applicable tax laws and regulations. Duncan Williams Asset Management, its affiliates, and the author are not responsible for any errors or omissions or for the results obtained from the use of this information. Past performance is not indicative of future results.

Sources:

State Sales Tax Deduction
IRS Publication 17, Chapter 22
URL: https://www.irs.gov/publications/p17

Student Loan Interest Paid by Parents
IRS Publication 970, Tax Benefits for Education
URL: https://www.irs.gov/publications/p970

Educator Expenses
IRS Topic No. 458, Educator Expense Deduction
URL: https://www.irs.gov/taxtopics/tc458

Job Search Expenses
IRS Publication 529, Miscellaneous Deductions
URL: https://www.irs.gov/publications/p529

Retirement Savings Contributions Credit (Saver’s Credit)
IRS Form 8880, Credit for Qualified Retirement Savings Contributions
URL: https://www.irs.gov/forms-pubs/about-form-8880

State and Local Property Tax Deduction
IRS Publication 530, Tax Information for Homeowners
URL: https://www.irs.gov/publications/p530

Health Savings Account (HSA) Contributions
IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans
URL: https://www.irs.gov/publications/p969

Energy-Efficient Home Improvements
IRS Form 5695, Residential Energy Credits
URL: https://www.irs.gov/forms-pubs/about-form-5695

Charitable Contributions
IRS Publication 526, Charitable Contributions
URL: https://www.irs.gov/publications/p526

Medical Expenses
IRS Publication 502, Medical and Dental Expenses
URL: https://www.irs.gov/publications/p502

Additional Resources:

IRS Website: https://www.irs.gov/

TurboTax Deduction Finder: https://turbotax.intuit.com/

‍