If you miss these credits and deductions, you might be overpaying on your taxes.
Taxpayers sometimes miss money-saving tax deductions and credits. But just because you may not realize they’re available doesn’t mean you’re not entitled to them. Before you file your taxes this year, check to see if you may qualify for these four commonly used tax credits and deductions.
1. Child and Dependent Care Tax Credit
Do you have a child in child care? Many parents can write off at least a portion of the cost of child care thanks to the Child and Dependent Care Tax Credit. Generally, you claim a percentage of what you spend as the credit, up to a certain amount. This amount is subject to change as tax code is updated and adjusted. Like many credits, this credit decreases when the parent has a higher income, but unlike most, it never goes away completely.
The Child and Dependent Care Tax Credit is different from, and can be used in addition to, the standard Child Tax Credit.
2. Education Tax Credits
If your dependent child is a college undergraduate — or if you are a college undergraduate and no one is claiming you as a dependent — you may be able to take advantage of certain higher education credits or deductions.
The American Opportunity Tax Credit is a partially refundable credit. This means that if the credit brings the amount of tax you owe below zero, you get a refund of up to 40 percent ($1,000 max). To qualify, you must be in the first four years of post-high school education, and this credit can only be taken four times.
If you took almost any post-secondary course this year, consider the Lifetime Learning Credit. It usually applies to tuition and mandatory enrollment fees. Keep in mind: You cannot claim both the American Opportunity Tax Credit and the Lifetime Learning Credit.
The IRS’s interactive tax assistant tool can help you figure out if you’re eligible for an education credit.
3. Gambling Losses Deduction
Any money you win from gambling counts as taxable income. However, if you itemize your deductions, you may be able to reduce the amount of winnings you pay tax on by deducting any gambling losses. Keep in mind: The deduction you take for any gambling losses cannot exceed your gambling winnings. For example, if you won $1,000 but lost $2,000, your deduction is limited to $1,000. The Tax Cuts and Jobs act expanded this deduction to allow some expenses related to gambling to be deductible.
4. Business Tax Deductions
Do you have a business? If you are a business owner, you can deduct the costs associated with running your company.
For example, if you’re a part-time Uber driver, you may be able to deduct relevant costs, such as repairs and regular maintenance. If you drive your car for personal use as well, you’ll be able to deduct a percentage of your expenses based on mileage. By keeping track of what you spend on a daily basis, you can unlock a slew of credits and deductions to minimize what you owe when tax time comes around.
To qualify as a business for tax purposes, your activities must be conducted for profit. You are no longer allowed to take an itemized deduction for losses related to a hobby activity, so now may be the time to turn that hobby into a business. See a financial professional to discuss options for taking that leap.
Learn additional tax-saving tips, or learn more about filing your taxes at the Regions Tax Center.
