If you file your own taxes, you are likely aware of some deductions that can help you save money. If you have an accountant file your taxes, it is good to be knowledgeable about different deductions so that you can check it over and make sure that you are saving as much money as you can. In either case, there are many tax deductions that are commonly missed, that could be saving you money every year.
Donating money to a registered charity is tax-deductible and can be claimed as such. This applies to both tangible donations and payroll deductions. This also applies to smaller costs, that people sometimes forget about. For instance, if you purchase ingredients for a non-profit organization to have a bake sale, this counts as a donation. The same thing applies if you incur mileage doing tasks for a charity. In 2019, the mileage rate was $0.14 per mile driven, so be sure to keep an accurate log. Keep in mind that these deductions only apply to registered charities. If you are unsure, there is a listing online of all the registered charities that would count towards a tax deduction.
A student can deduct up to $2,500 of student loan interest annually. If the student did not pay the interest themselves, their guardians can claim it on their behalf. This only applies if the student is still a dependant of the guardians. Mortgage interest can also be deducted. However, the principal mortgage payments cannot be deducted. If you have a second house as an investment property, don’t forget to deduct the mortgage interest on that house as well!
Earned Income Tax Credit (EITC)
This one is a credit, rather than a deduction. The rules can be a little complicated for this credit, so some people do not realize that they qualify for it. The credit amount can range from $529 to $6,557 as of 2019. This credit is meant for people who are in the low-to-moderate tax bracket. Many people do not realize that they have fallen into these tax brackets, as they only recently lost a job or reduced their working hours. To qualify for this credit, you must file a tax return. If you have been eligible for this credit in the last three years but didn’t apply, you can file at any time to claim it.
Child Care Credit
On your taxes, you are able to claim up to $6,000 for childcare expenses. This can include daycare, camps, and babysitters. Many people miss this because legally, you are able to run up to $5,000 of childcare expenses through a work account. This account is a tax-favored reimbursement, and the expenses used here cannot be claimed on the income taxes. So, for example, if you have $8,000 of daycare bills for the year, you can put $5,000 of them through the work account and claim $3,000 on your income taxes. The credit percentage will increase based on the amount of household income. Lower earners will have a higher childcare percentage.