In the labyrinthine world of tax codes and regulations, it’s easy for taxpayers to overlook potential deductions that could significantly lower their tax liability. While many are familiar with common deductions like mortgage interest and charitable contributions, Edward Andrew Karpus notes several lesser-known tax breaks often go unclaimed. This post from Edward Andrew Karpus explores some of these uncommon deductions to help you maximize your savings come tax season.
1. State Sales Tax
For those living in states without an income tax or where sales tax is higher, the IRS offers an option to deduct state and local sales taxes instead of state and local income taxes. This deduction can be particularly valuable if you’ve made significant purchases throughout the year, such as a car or a major home improvement project. The IRS provides tables to help estimate your deduction, but keeping receipts can lead to even larger savings.
2. Educator Expenses
Teachers and educators can deduct up to $300 for unreimbursed expenses for classroom supplies. This deduction is available even if you don’t itemize and take the standard deduction. Eligible expenses include books, supplies, computer equipment, and other materials used in the classroom. For educators working in special education, the cost of specialized training can also qualify.
3. Energy Efficiency Improvements
Homeowners who have made their homes more energy-efficient may be eligible for a tax credit, not just a deduction. Installing solar panels, solar water heaters, or other renewable energy systems can yield a credit of up to 30% of the installation cost, with no upper limit. Lesser-known improvements, like adding insulation, energy-efficient windows, and doors, also qualify for credits, although these have more restrictive caps.
4. Medical Miles
It is important for taxpayers to remember that they can deduct not only out-of-pocket medical expenses that exceed 7.5% of their adjusted gross income, but also the miles driven for medical purposes. This means that they can claim a deduction for the mileage they cover while traveling to and from medical appointments, pharmacies, and hospitals. It is worth noting that this applies to both personal vehicles and public transportation, and the standard mileage rate for medical purposes is 22 cents per mile. It is always a good idea to keep detailed records of your medical travel expenses, including dates, locations, and mileage, to support your deduction claims.
5. Dependent Care Credit
Often confused with the more well-known child tax credit, Edward Karpus notes the dependent care credit is aimed at working parents or guardians who pay for childcare. It can also apply to the care of a dependent adult. The credit ranges from 20% to 35% of up to $3,000 in care costs for one dependent or $6,000 for two or more, depending on your income.
6. Health Savings Account (HSA) Contributions
Contributions to a Health Savings Account are deductible and can significantly lower your taxable income. HSAs are available to individuals with high-deductible health plans and can be used to pay for qualified medical expenses tax-free.
Navigating the tax code to find every applicable deduction requires diligence and, often, professional advice. However, Edward Karpus explains that being aware of these lesser-known deductions can give you a head start in maximizing your tax savings. Always consult with a tax professional to ensure you’re getting the most out of your tax return and staying compliant with IRS rules. Remember, in the world of taxes, every little bit helps.
