Did you know over 45 million taxpayers claimed $1.2 trillion in tax deductions last year? Yet, many people might not be taking advantage of all the deductions they can. The standard deduction alone covers $747 billion. This means there’s a lot of money left on the table for those who don’t look closely at their options.
In this article, I’ll show you ten tax deductions you might be missing. By exploring these, you can increase your refund and lower your taxes. Let’s dive into how you can make the most of your tax savings.
Key Takeaways
- Millions of taxpayers benefit from itemizing deductions.
- Understanding different types of deductions can lead to better tax savings.
- Many individuals miss out on deductions that could increase their refunds.
- Exploring tax deductions can significantly reduce tax liability.
- Both itemized and standard deductions offer unique advantages.
Understanding Tax Deductions
Tax deductions are key to lowering what I owe in taxes. They help reduce my taxable income, leading to big savings. IRS rules let me subtract certain expenses from my income, reducing what I report to the tax authority.
Definition of Tax Deductions
Tax deductions are about subtracting allowed expenses from my income. This makes my taxable income lower. Knowing the IRS rules helps me save more. The IRS outlines which expenses qualify, so it’s important to stay informed.
Itemizing vs. Standard Deduction
I have to choose between itemizing deductions and the standard deduction. For 2024, the standard deduction is $14,600 for singles, $29,200 for married couples, and $21,900 for heads of household. It’s important to compare these amounts to see if itemizing is better.
Itemizing includes deductions like home mortgage interest and charitable donations. Each deduction has its own rules and limits. For instance, medical expenses can only be deducted if they’re more than 7.5% of my income. Choosing between itemizing and the standard deduction depends on my total deductions.
Commonly Overlooked Tax Deductions
Many taxpayers miss out on hidden deductions that can boost their tax refund. Knowing these can save you a lot of money. Here are some often overlooked deductions that can help your tax situation.
State Sales Taxes
State sales tax deductions are great for those in income tax-free states. Big purchases can lead to a big deduction. Keep track of your spending to see if it beats the standard deduction, even when filing jointly.
Reinvested Dividends
Investors should know about reinvested dividends. They can lower your taxable capital gains. Keeping records of these investments can save you money and reduce your tax bill.
Out-of-Pocket Charitable Contributions
Don’t forget about out-of-pocket charitable contributions. This includes mileage for charity and costs of supplies for volunteering. Even at $0.14 per mile, these add up and can lead to a significant deduction.
Student Loan Interest
Claiming student loan interest can also help. You can deduct up to $2,500 in interest paid, even if someone else made the payments. This is a big relief for many, making education expenses easier to handle.
