Over 25% of all the nation’s paid taxes come from federal individual income taxes. It usually makes up a large portion of most Americans’ tax bills too, prompting many to find ways to save through tax deductions and credits.
Since there are so many tax deductions and credits with different eligibility rules, it can become difficult to claim all of the ones you are eligible for. Let’s take a look at the most common tax deductions you might miss.
Student Loan Interest
Recent changes have made it easier to deduct student loan interest, though this has become one of the commonly overlooked tax deductions. Now, the IRS treats it as if the other person gave you the money and you paid it back.
This means that whether you or someone else pays back student loans, you can deduct up to $2,500 of student loan interest. Just note, that this is only available for students who are not claimed as dependents.
Moving and Mortgage Expenses
The average person can no longer deduct moving expenses from their taxes. However, if you are an active-duty military member and don’t receive reimbursement for the move, you should be able to deduct your expenses.
Your move does need to be permanent and ordered by the military. You can claim travel and lodging expenses and expenses for moving household goods, cars, and pets for you and your family.
If you aren’t in the military, you may be able to deduct expenses from your mortgage. When you buy a house, you may be able to deduct the initial points you pay for your mortgage. If you refinance, you may also be able to deduct the points over the life of the loan.
Earned Income Tax Credit
The Earned Income Tax Credit is one of the most overlooked tax deductions because as many as 25% of eligible taxpayers every year don’t claim this credit. The credit you are eligible for is dependent on your income, marital status, and family size.
Because it is a refundable tax credit, it’s even more valuable than you might imagine. Make sure to file your tax return, as you may be eligible even if you don’t owe taxes.
Business Use of Vehicles
If you use your vehicle for work, you may be able to deduct your expenses. You can add up your actual expenses and calculate what percentage of those expenses are due to business purposes.
The other option is to keep track of your driven miles and use the standard mileage method. Either option is acceptable. If you drive for a company such as Lyft, they may help you keep track of your mileage.
Some tax deductions can also help if you are self-employed or own a business. One of the commonly missed tax deductions revolves around purchasing vehicles.
If you own a business and purchase a vehicle, you may be able to take a special section 179 deduction. This allows you to deduct a large part of the cost of the vehicle in the first year. If you take the Tesla Model 3 Tax Deduction, you could potentially save a lot on your tax bill.
Tax Advantage of Common Tax Deductions You Might Miss
Filing taxes can be complicated, leading to some commonly overlooked tax deductions. By keeping an eye out for the most common tax deductions you might miss, you may be able to save a lot on your tax return.
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