Obviously, I can’t identify EVERY deduction available in one blog post. What you are allowed to deduct on your tax return is dependent on your individual tax situation and what money you spend on items that have preferential tax treatment. I have, however, been preparing taxes long enough that I can identify some of the common tax deductions that a lot of people miss.
To begin, the deduction for educator expenses. I have a lot of friends and clients who are teachers, and this is a deduction available only to them that many of them are unaware of. This is a $300 deduction directly from your adjusted gross income and if you are married filing joint and both you and your spouse are teachers, you can deduct up to $600. $300 may not seem like much, but it’s one of the few deductions that gives you a dollar-for-dollar reduction in taxable income. If I have clients who are teachers, I always check with them to see if they have enough expenses to qualify for the full deduction. Many of them do because teachers have a lot of stuff they have to pay out of pocket for, so this is a deduction I highly encourage them to take.
If you are a sole proprietor or a single member LLC, there are several business deductions available to you, that I usually have to pester clients for information for every year. The big one is the deduction for their health insurance premiums. Health insurance for someone who is self-employed can be very costly so make sure you provide your 1095-A to your tax preparer at the end of the year so that you can take advantage of this deduction. There is usually a balancing act between this deduction and the premium tax credit, but most of my self-employed clients are usually still eligible for this.
The home office credit – this gets missed a lot. If you are self-employed and your business is organized as a sole proprietorship or single member LLC and you work from home, you are eligible for the home office deduction. This is a business expense on the Schedule C and it consists of the business use portion of your home and corresponding expenses. I usually have my clients tally up how much they have paid in rent (if they rent), utilities, insurance (including rental insurance), and repairs to the home and then let me know the square footage of the home and the square footage of the space considered their “home office”. If they own the home, I ask for the mortgage interest and property tax information. You will want to make sure that your home office looks like a home office in case of an audit, but this is a deduction that I see frequently get missed on a tax return that I am reviewing.
Mortgage interest and property taxes in general, while they aren’t normally deductible on the federal return since the Tax Cuts and Jobs Act was passed, they are still deductible on the Kentucky state return and several other state returns. Furthermore, if you live in Indiana and work in Kentucky, then you get a special deduction on the Indiana state return for property taxes and rent payments. I almost always have to hound my Indiana resident clients for this information so I can get them this deduction on their state return. It’s not a common deduction among states, so it often gets forgotten about.
Again, those are just a few of the deductions that I find myself requesting more information from clients about when I’m preparing their returns. There are many more, but it really depends on your tax situation and more importantly your adjusted gross income. These are just the ones that I see get missed on returns that people prepare themselves or have someone else prepare or the deductions that I frequently find myself following up with clients for more information so I can get them the tax benefits they are entitled to.