10 Tax Benefits You May Be Missing Out On

No matter how much you earn, your goal should be to pay the IRS as little money as possible. And that's why you can't afford to give up any of the tax breaks you may be entitled to. Here are a few that you may not be capitalizing on.

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The money you put into a 401(k) or IRA won't just benefit you in retirement -- it can also lower your tax burden at present. As long as you contribute to a traditional retirement plan, as opposed to a Roth, the money you put in is income the IRS can't tax you on.

ALSO READ: 5 Common Tax Mistakes to Avoid in 2021

Flexible spending accounts (FSAs) let you set aside pre-tax dollars to pay for healthcare and childcare expenses. Estimating your costs in advance can be a headache, which is why some people opt out of these accounts. But the more you contribute, the more income you'll shield from taxes.

Unlike FSAs, health savings account (HSA) contributions don't expire, so you don't have to worry as much about estimating your yearly expenses. The money you put into an HSA is tax-free, so maxing out is a good way to pay less tax year after year.

The Earned Income Tax Credit is one of the most overlooked tax credits, namely because it's designed for lower earners who may not be required to file a tax return in the first place. But if you're a low-income household, it pays to see if you qualify for the credit. Not only is it worth a lot of money, but it's fully refundable so that if you owe the IRS nothing, you'll still get its value paid to you.

ALSO READ: The Secret to Getting Into the 0% Tax Bracket

You may be aware that when you write out a check to a local charity, you can deduct that sum on your taxes. But did you know that donated goods count as a deduction, too? You'll just need to keep records of the items you give away, and you can only deduct their fair market value -- meaning, what they'd sell for today, as opposed to their original value.

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The point of buying stocks is to eventually make money by selling them at a price that's higher than what you paid. And if you wait at least a year and a day before selling stocks at a profit, you'll pay the IRS less in the form of capital gains, thereby reaping some savings.

Depending on your tax-filing status and the amount of money you earn, you may be eligible to deduct the interest you pay on your student debt. This holds true even if you don't itemize on your tax return.

ALSO READ: 2021 Capital Gains Tax Rates: Everything You Need to Know

If you're a teacher and spend your own money on classroom supplies, you can deduct up to $250 on your taxes. As is the case for student loan interest, you don't need to itemize to reap this tax break -- you just need to hang onto your receipts.

If you're self-employed, there may be a host of business expenses you're eligible to deduct, from equipment to utility bills to mileage on your vehicle. It pays to consult a tax professional if you rack up a lot of bills in the course of doing your job so you don't miss out.

Investing in bonds is a good way to secure a steady income stream and diversify your portfolio. But many people don't realize that unlike corporate bonds, municipal bond interest is always tax-free at the federal level, making it a more efficient choice from a tax-savings perspective. Plus, if you buy municipal bonds issued by your state of residence, you won't pay state or local taxes on your interest income, either.

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There's no reason to let the IRS keep any more of your money than it's entitled to. By reading up on the various tax breaks out there, you can put yourself in a stronger position to reap more savings.

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