- Tax deductions like medical expenses, mortgage interest, and in some cases college tuition, can help reduce your overall tax bill.
- Note that these types of tax deductions only apply if you’re itemizing your taxes instead of taking the standard deduction, which increased as part of 2017 tax reform.
- If you have questions about your personal tax situation, consult a licensed tax attorney or accountant.
- This post has been reviewed for accuracy by Thomas C. Corley, CPA.
- See Business Insider’s picks for the best tax software »
You may have seen or heard people you know talking about how the new tax law made their refunds smaller than expected last year, or even increased the amount they owed to the IRS.
Several common deductions were eliminated by the Tax Cuts and Jobs Act of 2017 or other congressional actions, including, moving expenses, unreimbursed employee business expenses, theft losses, tax preparation fees, and safe deposit boxes.
Although things have changed, here’s a few deductions and credits you’ll want to remember to keep your tax bill as low as possible.
Reminder: If you have tax questions, talk to an accountant or an attorney.
1. Medical expenses
If you paid out-of-pocket for medical expenses, you might be able to deduct them on your taxes. What qualifies as a medical expense is broadly defined, including the obvious doctor’s visits, tests, and prescription drugs, as well as health insurance payments, dental and vision costs, medical devices, transportation to and from medical appointments, lodging if you need to travel for medical reasons, and accessibility-related home renovations. However, you can only deduct those expenses that exceed 7.5% of your adjusted gross income.
2. Home mortgage interest
If you own a home, you probably already know about this one — it’s one of the most significant tax deductions available to most families. You can deduct the interest you paid on a home mortgage valued up to $750,000 (up to $1 million if your mortgage was issued before December 15, 2017). If you have a home equity loan, the interest on that may no longer be deductible.
3. State and local (SALT) taxes
This one got a lot of attention because it was one of the most significant changes to the tax code. If you pay state or local income taxes (you probably do), property taxes, or other taxes to a state or local government, you can deduct those from your federal tax return — up to $10,000 regardless of whether you’re single or married filing jointly. Separate married filers get $5,000 each. This deduction was previously uncapped, so it’s a big hit to people who pay a lot of local taxes.
4. Charitable contributions
Donations to charitable organizations are still deductible. Make sure to keep evidence of your contributions — bank or credit card records for all donations, and an acknowledgment letter from the nonprofit if the donation was more than $250 will suffice. If you donate money to a college or university and receive sports tickets in exchange, you’ll now need to exclude the value of those tickets from the deductible amount.
5. Losses from natural disasters
“Casualty losses” — that means damage or destruction of property due to a sudden and unforeseen event — are deductible if they occur in a federally designated disaster area. You can look up federal disasters on the FEMA website — there’s more than you might think.
6. Gambling losses
If you’re a gambler, you can deduct money that you spent on gambling, up to your total winnings for the year. So if you spent $5,000 at Vegas casinos and won a $1,000 jackpot, you can only deduct $1,000 of your gambling losses.
7. Childcare expenses
If you pay for childcare so that you or your spouse can work or attend school, you may be able to get a tax credit for some of the money you spend on childcare expenses. You can claim up to $3,000 in expenses per child, and the credit (the amount deducted from your tax bill) is worth 20-35% of your expenses depending on your income.
8. Expenses related to a small business, freelancing, or independent contract work
If you have a small business, or you work as an independent contractor in the ‘gig economy’ (rideshare drivers, scooter chargers, food deliverers, personal shoppers, etc.), you’ll want to make sure you’re deducting all the expenses related to your business.
This includes mileage if you drive your own vehicle, commissions and fees paid for using apps to find work, equipment (including your phone and computer — you can deduct a percentage that corresponds to what percentage of the time it’s used for business purposes), relevant software or subscription services, and your health insurance premiums.
If you have a home office or other part of your home that’s specifically dedicated to your business, you can deduct the percentage of your household expenses (rent, utilities, etc.) that apply to that space.
All of these expenses are calculated separately from personal deduction on Schedule C, so you don’t have to rely on itemizing your taxes to take these deductions. And keep in mind that you’re paying both income tax and self-employment tax on your small business income — so you’ve got an added incentive to make sure you’re taking all the deductions you’re entitled to.
9. New ‘Qualified Business Income’ (QBI) Deduction
If you have income from a small business, you may qualify for a new “Qualified Business Income” (QBI) deduction of 20% of your business net income. This is calculated separately from both the personal deductions and your business expenses, and additional restrictions apply above certain income levels. Your tax software or tax preparer should calculate this automatically if it applies to you. And let’s face it: If your taxes are this complicated it is probably worth paying someone to make sure they’re done correctly.
10. Higher education expenses
Two tax credits apply to education expenses — depending on which one you qualify for, you can likely claim some of the cost of tuition and required fees, and may also be able to deduct the cost of books and materials. Education credits can be complicated, so you’ll want to rely on your tax software or accountant to figure out which one is best for you.
If you have student loans — or made payments towards loans in someone else’s name, like a partner or child — you can deduct the interest you paid during 2018. If it’s someone else’s loan, make sure to ask them for the form 1098-E that they received from their lender.
The Tuition and Fees deduction was extended for 2019. This deduction is capped at $4,000 for individuals with adjusted gross income up to $65,000 ($130,000 for married filers) and begins to phase out as your adjusted gross income exceeds $65,000 (or $130,000 for married filers).
These credits and deductions apply even if you take the standard deduction.
11. Rental expenses
If you rent out a room or apartment through a service like Airbnb or VRBO, you need to report the income you receive from that rental — but you can also deduct any related expenses, including a proportional share of your mortgage/rent and utilities, cleaning costs, advertising, and decor or furnishings.
If you own the property, you can also take a depreciation deduction on the rental use percentage of your home or apartment. Make sure to deduct any fees paid to the platform you rent through. If you rent property, you can deduct related expenses even if you take the standard deduction.
Still have tax questions? Connect one-on-one with a tax professional through JustAnswer, a Business Insider partner »
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