Reflection of the Week
Commonly Missed Deductions for 2023
Happy Friday, all!
Sorry to have missed the past couple of Fridays. I was traveling and getting some connection time with my family.
But I’m back in the full throws of tax season, as we’re ten days from the individual filing deadline. While tax season can be daunting and stressful, it’s essential to ensure you’re taking advantage of every deduction available to you. So this week, we’ll explore some commonly overlooked tax deductions to help maximize your 2023 tax savings.
Home Office Deduction:
With the rise of remote work, many Schedule C filers are eligible for the home office deduction. If you use a portion of your home regularly and exclusively for business purposes, you can deduct expenses such as utilities, rent, and internet costs. Be sure to calculate the square footage of your workspace and keep detailed records to support your claim.
Health Savings Account (HSA) Contributions:
Contributions to a Health Savings Account (HSA) are tax-deductible, regardless of whether you itemize your deductions. Additionally, you can make contributions up until the deadline. If you have an HSA through your employer or on your own, maximize your contributions to take advantage of this valuable tax benefit.
Student Loan Interest:
You’ve likely heard a lot of talk about student loan forgiveness lately. But even if you don’t qualify, you can still deduct interest paid on your loans. This deduction is available to taxpayers with a modified adjusted gross income (MAGI) below $70,000 ($145,000 if filing jointly). If you’re eligible, you can deduct up to $2,500 of student loan interest paid during the year, reducing your taxable income and potentially lowering your tax bill.
Charitable Donations:
Charitable contributions are a common deduction, but many taxpayers overlook certain qualifying expenses. In addition to cash donations, you can deduct the value of donated goods, mileage driven for charitable purposes, and expenses incurred while volunteering, such as supplies or uniforms. Keep detailed records and obtain receipts for all charitable contributions to support your deduction.
Clean Vehicle Credit:
The Clean Vehicle Credit presents a new opportunity for tax savings, incentivizing the adoption of environmentally friendly transportation. Taxpayers who purchase qualifying electric or hybrid vehicles may be eligible for a tax credit, reducing their tax liability. If you bought a car, ensure your dealer provides the required documentation to claim the credit.
State and Local Taxes:
State and local taxes, including property and sales taxes, are deductible on your federal tax return. Be sure to include these taxes when itemizing your deductions, as they can add to significant savings, especially for homeowners. Additionally, if you own a pass-through entity, you may be able to maximize this deduction by having your business pay the tax.
Educator Expenses:
Teachers and educators often spend their money on classroom supplies, but many are unaware that these expenses can be deducted on their tax returns. Qualifying expenses include books, supplies, and computer equipment used in the classroom. Educators can deduct up to $250 ($500 if married filing jointly) without itemizing their deductions.
Home Improvement Expenses:
Home improvement may also qualify for a deduction, offering homeowners additional tax relief. Renovations or repairs undertaken for medical necessity or energy efficiency improvements may be partially deductible.
I hope this helps give you a few other talking points with your tax advisor or preparer. With careful planning and attention to detail, you can maximize your tax savings and keep more money in your pocket.
Questions of the Week
- Are you ready to file your return?
- Did you miss any of these deductions?
- Are there any other deductions that you were able to take advantage of this year?
Reminder of the Week
4/15 will be here before you know it. If you haven’t already, get your prep documents to your preparer or start preparing the return yourself!