20 Tax Write-Offs That Will Help You Save Money
Every year, Americans scramble to get their taxes in order.
Ideally, you’ll file your taxes on time and receive a much-needed refund. After all, the last thing you want is to be stuck with a tax bill that takes hundreds, even thousands of dollars out of your pocket.
To maximize your tax return and reduce the chances of owing money at the end of the year, you should know about certain tax write-offs that can save you money.
Throughout the year, keep these 20 tax credits and deductions in mind so when tax season rolls around, you’ll be fully prepared and have all your financial ducks in a row.
1. Student Loan Interest Deduction
Student loan interest deductions are an excellent way for students and former students to save money. For every dollar you spend paying interest on your hefty student loans, you’re able to deduct money. These tax write-offs allows you to take off up to $2,500 from your taxable income.
2. American Opportunity Tax Credit
This credit is also great for students who are paying for tuition, books, learning equipment, and school fees. You’re able to claim $2,000 that you’ve spent on these items, plus 25% of the next $2,000 spent, totaling $2,500. However, this doesn’t include your living costs and transportation as a student.
3. Lifetime Learning Credit
The third education-focused credit on this list is the Lifetime Learning Credit. This credit allows you to claim 20% of $10,000 you’ve spent on tuition and school fees, for a total of $2,000. This credit also doesn’t include the money you spent on living and transportation costs as a student.
4. Child and Dependent Care Credit
If you have children of your own or take care of an elderly family member, you can receive tax credits for money spent on related expenses. This includes things like childcare and senior care and applies to children under 13, an incapacitated spouse or parents, and another dependent. The credit you’ll receive totals 20% to 35% of up to $3,000 of expenses. If you have two or more dependents, you can write off up to $6,000 of expenses.
5. Child Tax Credit
Another great tax credit for parents is the Child Tax Credit. This one can yield up to $2,000 for each child and $500 for every non-child dependent. You should note that the higher the income, the less money you’ll qualify for. This will help balance out some of the costs you incur as a parent.
6. Adoption Credit
For those who have decided to adopt a child, the incurred expenses and adoption fees can be credited. In 2018, this credit gave you up to $13,810 for adoption costs for each child. In 2019, this number slightly increased to $14,080. This credit doesn’t apply if the child you’re adopting is your spouse’s child. Also, those who are adopting someone with special needs are able to receive the full credit even if they spent less.
7. Earned Income Tax Credit
This credit can be anywhere between $529 and $6,557 and is geared toward families with lower incomes. If your adjusted gross income is below $56,000 this might be a credit to consider. The credit amount will depend on how many kids you have, your marital status, and how much you make per year. You also won’t qualify for this credit if you’ve made over $3,500 from investments over the course of the year.
8. Charitable Donations Deduction
Charitable contributions are great tax write-offs at the end of the year. Every time you donate things like vehicles, clothing, and other items to a place like the Salvation Army, you can save the receipt and write it off. This also applies to cash donations to qualifying organizations.
9. Medical Expenses Deduction
If you’ve had a major medical procedure or have been to the doctor a lot over the past year, you can write off some medical expenses. This includes qualifying medical expenses that weren’t reimbursed and are over 10% of your gross income for the year.
10. State and Local Taxes Deduction
Property owners are able to deduct up to $10,000 for paid property taxes. If you’re married and file separately, this deduction is only $5,000. There are also other state and local sales taxes that qualify for deductions. This deduction applies to a wide range of things you’ve paid taxes on over the course of the year. Property, land, vehicles, boats, and much more can be deducted from your taxable income.
11. Mortgage Interest Deduction
Homeowners are also able to deduct money from their taxable income by the amount of interest they’ve paid on their mortgage. This perk helps alleviate some of the costs of home ownership and is a great addition to your tax return. This will cover debt of up to $750,000.
12. Gambling Loss Deduction
If you’re quite the gambler, you’re able to write off money that you’ve lost or incurred gambling. You should note that this will only apply to losses and winnings that you’ve reported, and you cannot deduct more money than you’ve won.
13. IRA Contributions Deduction
In some cases, you’re allowed to deduct money that you’ve thrown into a traditional IRA. The amount you’re able to deduct will depend on whether you or your spouse has a retirement plan through your job and how much money you make per year.
14. 401(k) Contributions Deduction
There’s a good chance that you have a 401(k) plan through your employer that can also help you deduct money on your tax return. Money that’s directly deposited into a 401(k) from your paycheck can be written off. For this type of deduction, you can write off up to $19,000 per year. If you’re over 50 years old, this number is slightly higher at $25,000.
15. Saver’s Credit
Those who are saving for retirement are also able to write off their contributions. This applies to 10% to 50% of the contributions that you make towards an IRA, 401(k), 403(b), and other types of retirement plans. This deduction will cap out at $2,000 and your percentage will be based on how much money you make and how you file your taxes.
16. Self-Employment Expenses Deduction
If you’re self-employed or a freelancer, gig worker, or contractor, there are numerous tax write-offs for you to consider. Business expenses like your automobile insurance, home insurance, health insurance, fuel, phone bill, internet bill, education, and more can be written off. These are excellent tax deduction opportunities for small business owners or independent contractors to save money at the end of the tax year.
17. Home Office Deduction
If you work from home quite often and consider it your main place of work, home costs can be tax write-offs. This will cover things like your rent, utilities, maintenance, taxes, repairs, and equipment you’ve purchased to set up your home office.
18. Educator Expenses Deduction
If you’re a school teacher, the IRS allows you to write off any supplies you’ve purchased for your school. This can be things like books, pencils, notebooks, paper, computer software, and other supplementary materials that you use in the classroom. Bear in mind this deduction caps at $250 per person.
19. Health Savings Account Contribution Deduction
If you put money into a health savings account, you’re able to deduct some of your contributions. For those who pay into one of these accounts, you can deduct up to $3,500. For those with a family, you’re able to deduct up to $7,000.
20. Residential Energy Credit
If you’ve recently fixed your home to be more “green,” things like solar panels and energy efficient equipment can give you a nice deduction. This will cover up to 30% of your maintenance costs to install this equipment.
Save on Your Next Tax Return
When it’s time to file taxes, do your research to maximize your tax refund. If you thoroughly study this list of tax write-offs, you can put yourself in the best position possible to have a good return and not have to pay a large tax bill.