It’s almost the new year, and many of us are looking forward to accomplishing something new in 2024. Some of the most common resolutions include:
- Lose Weight
- Get Out Off Debt
- Learn Something New
- Travel More
- Volunteer
All of these goals have something in common, too: they may have the added bonus of a tax deduction! While I’m sure you’re excited to make these changes for a sense of personal accomplishment, it would certainly be icing on the cake if you can get some financial benefits as well. Read on to learn more:
- Lose Weight: If you’re working to drop excess pounds this year, you can take satisfaction in knowing you’re taking big steps to reducing healthcare expenses in the future. However, you may be able to deduct certain weight loss medical expenses, like gastric bypass or visits with the nutritionist, if prescribed by a doctor to mitigate or prevent disease. Even the cost for commercial programs like Weight Watchers can be deducted, providing your doctor has confirmed that your current weight is a threat to your health. You must have this in writing. If your doctor prescribed Ozempic or Wegovy to treat a specific disease, then you may be able to deduct your cost. But if you purchased these medications because you want to start dropping some pounds, then you will not be able to deduct it.
- Get Out of Debt: While there’s no tax deduction for consumer debt (i.e., credit cards), if you have a student loan or mortgage, you’ll want to look into deducting your interest payments. You can deduct interest paid not only on your home’s mortgage but also on a second mortgage, a line of credit, or a home equity loan. If you had federal student loans over the past couple of years, tax year 2023 may be the first tax year since tax year 2020 you have student loan interest to deduct on your taxes since payments on federal student loans and interest was paused and payments didn’t resume until October 2023.
- Learn Something New: If you attend a qualifying trade school or college, you may be able to claim the American Opportunity Tax Credit or the Lifetime Learning Credit. You cannot claim the American Opportunity credit in the same year you claim the Lifetime Learning credit because the IRS only allows one tax reduction per student per year. For most students who are in one of their first four years of post-secondary education, the American opportunity tax credit (AOTC) can provide greater tax savings since the maximum credit is $2,500 vs. $2,000 for the Lifetime Learning Credit. Luckily, TurboTax will help determine what you are eligible for!
- Travel: Wouldn’t it be great to get tax deductions for your vacations? Unfortunately, not all travel is created equal in the eyes of the tax code. The good news is that if you are self-employed, you may be able to deduct qualifying expenses for business trips. To determine whether you can deduct an expense on your tax return, you must meet two requirements: it must be ordinary and necessary to your business. The IRS defines an ordinary expense as one that is common and accepted in your industry and considers an expense to be necessary if it is helpful and appropriate to your business. Common expenses you may have while traveling for your business include transportation costs, tolls, and lodging.
- Volunteer: If you want to do more in support of your favorite charity, volunteering can be rewarding in more ways than one. You may be able to get a tax deduction, not for your time spent, but for supplies you purchased for the charitable organization, miles driven to get to the charitable organization or money donated during the year.
Make sure you keep good records and your receipts to make things easier come tax time. TurboTax will also make claiming these tax deductions easy by asking you simple questions related to you so you don’t need to know anything about these tax laws.
Achieving Your New Year’s Goals
So, let’s get to the harder part: achieving your goals! The secret is to break your goal or goals into pieces and work on them one at a time. You can’t change your life until you change your habits. If you want to save $2,000 by the end of the year as part of your emergency fund, you can break it down and see that you just have to save about $167/month.
Change doesn’t have to be big, but it has to be consistent. Celebrate each step you break through. I’d love to hear from you. What are your goals for this year? What ideas do you have to reach them?