There have been a lot of tax code changes in the last few years. It can be hard to keep up with them. But if you make it a point to know or ask an accountant about specific deductions, you could save hundreds of dollars.
Deduct Loan Origination Fees
Most people know that you can deduct mortgage interest. But there are also loan origination fees. These are sometimes also called:- maximum loan charges
- loan discount
- discount points
Student Loan Interest
No matter who pays the loan, they can receive a tax deduction. In the past, if a student took out a loan and their parents paid it back, the student couldn’t deduct the interest. This was because the loan had to be in the name of the one making the payments. Everyone was out of luck.But that changed. Now, even if the parents make the payments, the student is eligible for a tax deduction on the interest. The Internal Revenue Service (IRS) sees it as though the student was given the money to pay the debt.
Summer Camp Deduction
If you work and pay for childcare, summer camp comes under the child and dependent care credit (CDCC). Although this tax credit is back to its pre-pandemic size, it still can reduce your tax liability.The CDCC is generally worth 20–35 percent up to $3,000 for one qualifying dependent. The maximum is $6,000 for two or more qualifying dependents.
It goes beyond dependent children. The CDCC applies to a dependent spouse unable to care for herself and has lived in your home for at leas six months.
Subtract Reinvested Dividends
Although not a tax deduction, it can save you hundreds of dollars. If you automatically reinvest mutual funds and stock dividends in extra shares, each investment increases your “tax basis” in these mutual funds and dividends.Volunteering for Charitable Trips
This is an excellent deduction if you travel for charitable work. You can take the travel expenses as a charitable deduction. You just can’t take the value of your time or service.There can’t be any vacation involved in the trip. And you'll need to keep records of your charitable activities.
State and Local Tax Deduction
Taxpayers can deduct state and local taxes under the state and local tax deduction (SALT). You can write off up to $10,000 for a single tax filer and $5,000 if filing jointly.Note there is a marriage penalty. Currently, a proposed law to eliminate this penalty, raising the joint filers to $20,000, is stalled in Congress. If passed, it would also apply to the tax year 2023.
State Tax on Vehicles
Everyone pays a state sales tax when purchasing a vehicle, but some states continue yearly taxes on cars. States often send a notice for tax payment as a requirement to register the vehicle.Under the SALT, you may be able to deduct that cost as part of your personal property taxes.
It comes under personal tax if the state calculates the tax based on the car’s value. But if it is calculated based on the vehicle’s weight, it isn’t tax deductible.
Long-Term Care Insurance
You can minimize your tax burden by deducting a portion of your long-term care policy. It’s considered a deductible medical expense.Talk to Accountant About Deductions
If you’re itemizing, take advantage of the various deductions and credits available.Itemizing your deductions instead of taking the standard deduction may further lower your tax liability. But missing a deduction could cost you.
Discuss your options with a qualified tax professional.
