The federal tax code includes some not-very-well-known tax deductions that can lower your tax bill or even increase your tax refund. Here are a few surprising tax breaks that you won’t want to miss.
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1. Medical expenses and insurance
When your deductible medical expenses exceed 7.5% of your adjusted gross income in 2019, you can claim the amount over this threshold as an itemized deduction. What many people don’t realize is that these expenses can include the premiums you pay for your health insurance using after tax dollars.
If you’re self-employed, you might be able to deduct all of your health insurance premium costs as an "above the line deduction" that can reduce your adjusted gross income. Above the line deductions can be taken without requiring you to itemize your deductions.
2. Ongoing education
If you continue your education after high school, some of your educational expenses might be tax deductible, even if you’re not a full-time college student. With the Lifetime Learning credit, you can deduct up to $2,000 per tax year of the cost for your ongoing education.
The Lifetime Learning credit covers 20% of the first $10,000 you spend on education. It’s phased out at higher income levels, but it isn’t restricted based on whether you are a full-time or part-time student, or if you already have a degree.
3. Your state’s sales taxes
You can deduct the amount you paid in state sales taxes or state income taxes (but not both) from your federal income taxes. Deducting the sales tax you paid can be a big benefit if you live in a state that doesn’t have a state income tax. Even if you live in a state with a state income tax, deducting the sales taxes you paid might result in a larger tax break if you purchased a large-ticket item like a car, a boat, or an engagement ring during the tax year.
To receive either of these tax breaks, you must itemize your deductions rather than take the standard deduction. TurboTax can help you decide whether it pays for you to itemize or take the standard deduction. It can also help determine if it’s better to deduct your state income taxes or your sales taxes.
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4. Gifting to your favorite charity
Most people know that cash donations to a favorite charity can be tax-deductible, but fewer people realize that out-of-pocket expenses for charitable work that you do may also qualify as a deduction.
Let’s say you cook for a charity fundraiser or donate baked goods. You might be able to deduct the cost of the various ingredients that went into the foods you prepared. The same goes for items you donate to a charity or services that you provide, such as driving. Be sure to save your receipts and record your miles driven for charities in case you are audited.
5. Paying for classroom materials
If you’re a teacher and spend your own money on items you need in your classroom, you may be able to deduct those expenses from your income. The IRS allows qualified kindergarten through twelfth grade educators to deduct up to $250 for educational materials. If you qualify, you’re allowed to subtract the qualified expenses directly from your taxable income, even when you don’t itemize.
6. Child care while working or going to school
The cost of having a child care provider watch your children might be tax deductible. Whether or not you can deduct the cost depends on why you need the child care. If it’s to go to the gym, to play a round of golf, or go to the movies, it probably won’t be deductible—unless those activities are part of your job or your full-time schooling. To be deductible, the child care must be used while you’re looking for employment, working, or going to school full time.
To claim child care expenses, you’ll need supporting documentation, whether the provider is an individual or an organization, including the child care provider’s:
- Tax identification number
- Address of the location where the childcare was provided
- In some states, you’ll also need to report the child care provider’s telephone number
Your child care expense is not technically a tax deduction. It’s covered under the Child and Dependent Care Tax Credit, which might be even better for you.
- Because it’s a credit, not a deduction, you’re not required to itemize your tax deductions.
- You can use the Child and Dependent Care credit to lower your taxes even if you take the standard deduction.
TurboTax can help you identify the lesser known tax credits and deductions that apply to your unique tax situation. With TurboTax, you’ll answer simple questions and we’ll search for and find all the deductions you’re entitled to receive. To learn about even more things you might not know are tax deductions, visit TurboTax.com.