Each year, tax season seems to sneak up before you know it. One of the best ways to reduce stress and get the most out of your tax return is to be proactive. By keeping track of potential tax-deductible expenses throughout the year, you can maximize your refund or reduce the amount of taxes owed. A great way to start is by organizing your receipts now, so you're ready when it's time to file.
As you prepare for tax season, tax services like TurboTax make it easy by identifying the deductions and credits you’re eligible for, based on a few simple questions. But knowing what to look out for in advance can also help you plan better. Below are 10 key tax deductions and credits to keep in mind as you gather your receipts and prepare to file your return.
1. Education Expenses
If you're paying for college, don’t miss out on the education credits available. The American Opportunity Tax Credit offers up to $2,500 for the first four years of college, while the Lifetime Learning Credit, worth up to $2,000, is available even if you're not pursuing a degree. Remember, even rented books count, so gather those receipts!
2. Child and Dependent Care Credit
If you paid for daycare, before or after-school care, or day camp for children under 13, you might qualify for the Child and Dependent Care Credit. For tax year 2024, you can claim up to $3,000 in care expenses for one child or $6,000 for two or more. This could result in a tax credit of up to $1,050 for one child or $2,100 for two or more, depending on your income.
3. Health Insurance for the Self-Employed
If you're self-employed, the premiums you pay for health insurance for yourself and your family are tax-deductible. Even if you're not self-employed, there may be deductions available if you itemize your return.
4. Medical Expenses
Medical expenses can add up quickly, and they may be deductible if they exceed 7.5% of your adjusted gross income (AGI) in 2024. This includes medical travel at 21 cents per mile and even doctor-recommended exercise equipment or pools.
5. Charitable Contributions
Don’t forget to gather your donation receipts! You can deduct contributions to qualified charities, no matter how small, and even deduct 14 cents per mile for any travel related to volunteer work.
6. State Income or Sales and Local Tax Deduction
You can deduct either state income tax or state sales tax if you itemize. For those in states without income taxes, opting for a sales tax deduction could save you money. However, keep in mind that the total deduction for state and local taxes, including property taxes, is capped at $10,000.
7. Home Office Deduction
For the self-employed, if you use part of your home exclusively for work, you can deduct a portion of your home expenses like utilities and mortgage interest based on the square footage used for business.
8. Miscellaneous Itemized Deductions
While many miscellaneous deductions are no longer available, uninsured losses due to federally declared natural disasters may still be deductible. Keep track of losses due to events like fires or storms if they exceed 10% of your AGI.
9. Other Dependent Credit
If you’re supporting someone who isn’t a child, such as a parent or other relative, you could qualify for a $500 tax credit.
10. Mileage Expenses for the Self-Employed
If you drive for business, you can deduct mileage at 67 cents per business mile in 2024. Keep a detailed log of your business travel to ensure you claim the full deduction.
Final Thoughts
Being diligent throughout the year about collecting receipts and tracking expenses is key to maximizing your tax deductions and credits. By planning ahead and understanding which deductions apply to your situation, you can reduce the amount of taxes you owe—or increase your refund come tax season.
As tax time approaches, keep these deductions and credits in mind and be sure to consult with a tax professional or a service like TurboTax to ensure you're getting the most out of your return.
Organize your finances now, and you'll thank yourself when it's time to file!
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