10 Tax Deductions You Didn’t Know You Should Take
Tax breaks are not just for the rich. These 10 tax deductions can also help lower and middle-income taxpayers’ obligations and provide some tax relief help.
1. Earned Income Tax Credit
Lower-income tax filers may be eligible to claim the Earned Income Credit. The filer’s adjusted gross income must be less than the income limited to receive this refundable credit.
2. Child Tax Credit
The Child Tax Credit is available to lower and middle-income filers that have dependent children under the age of 17. The credit is $2,000 per child with no limit to how many children it can be claimed for.
3. Childcare Tax Credit
Some taxpayers may qualify for a childcare tax credit of up to $3,000 for one child or $6,000 for two or more children. The children must be under the age of 13. Eligible expenses include the cost for preschool, before or after-school care, summer day camp, or a nanny.
4. Credit for Other Dependents
It is possible to claim a $500 tax credit for other dependents. Qualifying dependents include kids in college or elderly parents.
5. American Opportunity Credit
The American Opportunity Credit is a tax credit of up to $2,500 of college tuition and related expense paid during the year. This credit can be used for all four years of college.
6. Lifetime Learning Credit
The Lifetime Learning Credit can be used for additional education and is up to a maximum of $2,000 per year. It cannot be claimed with the American Opportunity Credit during the same year for the same student.
7. Student Loan Interest Deduction
Some taxpayers may be eligible to deduct up to $2,500 of student loan interest each year. This can be done if the taxpayer’s modified adjusted gross income is within the income thresholds.
8. Gambling Losses Deduction
Money that is lost through legal gambling activities may be eligible for a tax credit. The catch with this is that the taxpayer cannot be reimbursed for any more than what they have won at the gambling establishment.
9. Deduction for Medical Costs
Taxpayers having high medical expenses may be eligible for a tax deduction. However, because of the Affordable Healthcare Act, taxpayers under 65 must have medical expenses that are more than 10% of their annual income.
10. Sales Tax or Previous Year’s State Tax Deduction
Taxpayers have the option to deduct the sales tax or state tax paid in the past year. Taxpayers in states without sales tax can take the state tax deduction, while those who have both in their state can choose the one that gives them the most savings.