17 Tax Deductions You Can’t Afford to Miss
There are many tax write-offs that people overlook when doing their taxes. Experts chime in on some of the most frequently missed opportunities to save money on April 15.
Your second home
“If you own a second home, and you itemize expenses on Schedule A, you can deduct the loan interest on the mortgage and the property taxes. Don’t forget that a second home can include an RV, tiny house or boat, so long as it has a kitchen and bathroom facilities.”—Thomas J. Williams, EA, tax accountant and co-founder of Deducting the Right Way.
Negative investment returns
“This is the time of the year when it is good to review your portfolio for any investments with a negative return. Capital gains taxes are paid on investments sold with a positive gain during the year. Investments sold at a loss, however, can be used to show reduced earnings on your portfolio. Reduced earnings often mean reduced taxes. You can only apply losses on long-term stocks against the gains on long-term stocks. The same rule applies to short-term stocks. Short-term losers offset short-term winners.” —Gary Scheer, an investment advisor for over 35 years, founder of Retirement Financial Advisors, LLC
“Employees participating in a non-HSA Compatible Health Plan may choose to enroll in a health care Flexible Spending Account (FSA). They can contribute up to $2,650 on a pretax basis in 2019 for eligible health care expenses, regardless of whether they are single or have dependents. The funds must be used within the plan year or else they will be lost. This is known as ‘use it or lose it.’ Many companies offer employees the opportunity to place money in a Childcare Flex account. This type of FSA allows one to set aside up to $5,000 ($2,500 for married individuals filing separate returns) before taxes to pay for dependent care expenses.” —Gary Scheer, a Registered Investment Advisor for over 35 years, founder of Retirement Financial Advisors, LLC
“People may wish to consider enrolling in a High-Deductible Health Plan (HDHP) paired with Health Savings Account (HSA). Contributions to an HSA are tax-deductible and grow income tax-free. HSA funds can be used to pay for eligible healthcare expenses or can be saved for future health care expenses including long-term care. The maximum 2019 HSA contributions are $3,500 for an individual employee and $7,000 for an employee plus spouse/domestic partner, employee plus children or full family. There is no ‘use it or lose it’ concerns with HSAs.” —Gary Scheer, an investment advisor for over 35 years, founder of Retirement Financial Advisors, LLC. Here’s what experts wish you knew about the new tax laws.
Fair market value of an inherited home
“Taxpayers often misunderstand the tax basis of property that is inherited. The tax basis of this property is not what the person who left it to them paid for it, but rather whatever the fair market value was on the date of death of the person who left it to them. When it comes to real property, this often means that an appraisal showing the date-of-death value is required. Knowing this about a property that was held for a long time by whoever left it to you can save you thousands of dollars.” —Steven J. Weil, Ph.D., President and tax manager of RMS Accounting. Here are more tax secrets every smart homeowner should know.
“Taxpayers should automatically reinvest their dividends back into their stock or mutual fund. This isn’t technically a tax deduction, but this tip will advise taxpayers on how to save money that they once overpaid in taxes. It isn’t commonly known, but every reinvestment into stock increases a taxpayer’s ‘tax basis’ with either their mutual fund or stock. In exchange, an increase with their tax basis lessens the amount that a taxpayer’s capital gain will be taxed on by a significant amount—if subtracted correctly. This savings goes into effect when it comes time to for a shareholder to sell their shares.” —Jacob Dayan, Esq., CEO and co-founder of Community Tax
“Someone who got divorced in 2018 may think they cannot deduct alimony paid in 2019.” —Dave Du Val, EA and Chief Customer Advocacy Officer at TaxAudit. Here are 13 secrets IRS agents don’t want you to know.
Military moving expenses
“Military personnel may not understand they are the only ones still allowed to take a deduction for moving expenses.” —Dave Du Val, EA and Chief Customer Advocacy Officer at TaxAudit
Yes, you can deduct these—”up to the extent of your winnings, with sufficient documentation.” —Coach Crystal Nickson, a certified financial social work educator. Here are things that your tax preparer won’t tell you for free.
Home office space
“Self-employed? Entrepreneurs can claim a maximum of 300 sq.ft. for their in-home office, earning about a $1,500 deduction.” —Coach Crystal Nickson, a certified financial social work educator.
Service animal training
“According to IRS Publication 502, dog owners can include medical expenses, the cost of training, and maintaining a guide dog (or other service animals) to assist visually-impaired, hearing-impaired or other persons with physical disabilities.” —Coach Crystal Nickson, a certified financial social work educator. Here are 11 tax-related documents you should never throw away.
“Taxpayers will receive a tax credit based on 100 percent of the first $2,000, plus 25 percent of the next $2,000, paid during the taxable year for tuition, fees, and course materials.” —Randy Tarpey CPA, Sickler Tarpey & Associates
“Medical expenses such as eyeglasses, hearing aids, walkers, crutches, medical mileage, and transportation cost are deductible. In addition, you may also qualify for remodeling your home, such as installing ramps and lowering shelving because of physical restrictions. And the cost of a nursing home if it was medically necessary. These types of expenses can be substantial and provide a great deal of tax savings.” —Paul T. Joseph of Joseph & Joseph Tax & Payroll
“Donating your time to various projects. You may be able to write off the cost of transportation, along with any out-of-pocket expenses that you generate as a result of the charitable activity you’re participating in. You can also use the charitable mileage factor of 14 cents a mile, as long as you keep track of the miles. Out-of-pocket cash contributions are also deductible, such as contributing to the red bucket campaign by the Salvation Army.” —Paul T. Joseph of Joseph & Joseph Tax & Payroll
Student loan interest
“In the past, in order for anyone to deduct the student loan interest, they had to be legally responsible for repaying the debt. Now under the new act, the child can deduct up to $2,500 of student loan interest paid by mom and dad as long as the child is not a dependent of mom and dad.” —Paul T. Joseph of Joseph & Joseph Tax & Payroll. Next, find out the 14 tax mistakes that could cost you thousands.