With the tax filing deadline being less than 3 months away, now is a good time to start thinking about money you shelled out for tax-deductible expenses last year. Start gathering your receipts in order to make an impact on your taxes by increasing your tax refund or lowering the amount of taxes you owe.
If you haven’t started filing your taxes yet don’t worry. You can start today with TurboTax, and TurboTax will ask you simple questions and give you the tax deductions and credits you’re eligible for based on your answers and tax situation. TurboTax Live tax experts are also available in English and Spanish, year-round, and can even review, sign, and file your tax return or you can fully hand your taxes over to them.
Although TurboTax will give you the tax deductions and credits you’re eligible for, here are 10 money-saving tax deductions (and credits) to keep in mind when you start gathering your receipts for tax-time.
- Education Expenses: There are two education credits available — the American Opportunity Tax Credit and the Lifetime Learning Credit. The American Opportunity Tax Credit is a credit worth up to $2,500 for the expenses you paid for the first four years of college. The Lifetime Learning Credit, worth up to $2,000 per tax return, is available even if you aren’t pursuing a degree. Make sure you count books and lab fees — even the books you rent on sites such as Chegg and others.
- Camp for Your Kids: You may be entitled to the Child and Dependent Care Credit if your children are under the age of 13, and you took them to a before and after school care program, daycare, or day camp so that you can work. However, overnight and sleepover camps are not eligible for child tax credits.
- Health Insurance: If you are self-employed, you can take a tax deduction for the health insurance premiums you pay for yourself and your family. If you are not self-employed, health insurance premiums paid after taxes may be tax deductible if you can itemize your deductions.
- Medical Expenses: Medical expenses, including miles driven for medical reasons (at 17 cents per mile), may be tax-deductible if they exceed 7.5% of your taxable income in 2020 and you are able to itemize your tax deductions. The cost of exercise equipment or purchasing and maintaining a spa or swimming pool may be tax-deductible as medical expenses if your doctor recommends them to mitigate a medical condition.
- Charitable Contributions: If you made any donations, no matter how small, remember to have your receipts ready since you may be able to deduct them. It’s easy to forget the smaller amounts you contributed to various walks or races, but they add up quickly. You can’t deduct the value of your time when you volunteer, but you can deduct your travel at 14 cents per mile as well as any parking and tolls you paid. Don’t forget that under the CARES Act, you can deduct up to $300 in cash donations if you claim the standard deduction. TurboTax ItsDeductible will help you accurately value and track your charitable contributions year-round and then transfer your contributions to your 2020 tax return.
- State Income or Sales and Local Tax Deduction: You are permitted to deduct either the state income tax paid or the state sales tax paid, if you itemize your tax deductions. You can choose either but if you live in a state without a state income tax, it’s a no-brainer — you would deduct the state sales tax you paid. You are free to choose the one that gives you the biggest tax deduction. TurboTax will choose the option that gives you the biggest tax deduction based on your entries. The amount you are able to deduct is capped at $10,000 including property taxes, state income taxes or sales tax.
- Home Office: If you use part of your home regularly and exclusively to perform administrative or managerial activities for your self-employed business, you can claim a home office deduction for a portion of utilities, rent, mortgage interest, depreciation, maintenance and the like based on the square footage of your home used for your business. Many people who are employees that worked from home in 2020 may still be working from home and wondering if they can deduct at-home expenses. Following tax reform, you can no longer deduct at home expenses on your federal taxes if you are an employee.
- Miscellaneous itemized tax deductions: Miscellaneous itemized deductions like unreimbursed job expenses and tax preparation expenses, unless it’s tax preparation for your self-employment taxes, are no longer available on your federal taxes following tax reform. Uninsured losses due to fire, storms, shipwreck or theft more than 10% of adjusted gross income are tax-deductible only if they are the consequence of a federally declared natural disaster.
- Other Dependent Credit: If you are caring for someone other than a child dependent, take advantage of the new deduction. This is a tax credit of up to $500 per non-child dependent that you support.
- Mileage Expenses: If you use your vehicle for business and you are self-employed, you can deduct your mileage 57.5 cents for 2020 (it was 58 cents per mile in 2019). If you work for multiple clients, the cost of traveling between job locations is tax-deductible as well.
Don’t worry about knowing these tax rules. TurboTax asks you simple questions about you and gives you the tax deductions and credits you’re eligible for based on your answers. If you have questions, you can connect live via one-way video to a TurboTax Live tax expert with an average of 12 years experience to get your tax questions answered from the comfort of your home. TurboTax Live tax experts are available in English and Spanish year round and can even review, sign, and file your tax return or you can fully hand your taxes over to them. All from the comfort of your home.