If you miss a dental appointment, you might be a little relieved, and if you miss the bus, you might be a little annoyed, but if you miss some tax deductions, you'll be out some cold, hard cash -- and that can be more than a little annoying.
Here are seven tax deductions that many people -- and even some paid preparers -- overlook. Being familiar with them could potentially cut of thousands of dollars off your tax bill.
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Note that some deductions of these will only be available for the 2017 tax year, because Congress took them away in the recent tax overhaul. Others simply might not be worth using anymore for you after this year, due to the significant increase in the standard deduction, which will make itemizing unnecessary for many millions of taxpayers.
1. Contributions to traditional IRAs
When you prepare your taxes, be sure to deduct whatever contributions you've made to your traditional IRA, because that can be a hefty sum. The annual contribution limit for IRAs in both the 2017 and 2018 tax years is $5,500, plus another $1,000 for those 50 or older. If you reduce your taxable income by $5,500, and you're in the 24% tax bracket, you avoid $1,320 in taxes! Note that you have until April 17, 2018, to make IRA contributions for the 2017 tax year. Similarly, you can make your 2018 contributions any time until April 15, 2019. (Roth IRAs don't offer tax breaks in the year of your contribution. Instead, they offer tax-free withdrawals years down the road.)
2. Job-search expenses
This is one of the many itemized deductions the GOP tax overhaul eliminated for 2018 and beyond. Still, using it while you can could save you some dollars. Here's the scoop: Job-search costs may be deductible if you're looking in the same field that you currently work in, and if you're not embarking on your first career. The costs come under the IRS's "miscellaneous expenses" heading, which has a minimum threshold of 2% of your adjusted gross income (AGI). So, for example, let's say your AGI is $60,000. The expenses below 2% of that -- $1,200 -- are not deductable. But if all your miscellaneous expenses total, say, $1,800, the portion that exceed 2% of your AGI -- in this case, $600 -- can be deducted. Among the expenses that qualify in the job-search subset are transportation to and from interviews, the cost of printing resumes and mailing them out, and food and lodging costs if your search has you staying overnight somewhere. Note, too, that you don't even have to land a particular job for the search costs related to it to be deductible.
3. Moving expenses
Here's another deduction going away after this year. It lets you deduct your moving expenses, such as the cost of hiring a moving company or renting a truck, if you're moving in order to take a new job or because your job changed locations. Your new job site must be at least 50 miles further away from your old home than your old job was, though, and you may not have moved earlier than a year before starting to work in the new location. You also must continue to work in that location full-time for at least 39 weeks during the first year after the move. Learn more about what expenses qualify in IRS Publication 521.
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4. Charitable contributions
You probably know that you can deduct qualifying contributions to charity, but be sure to look beyond the occasional big checks you write. Other kinds of donations that can count include donated goods (even a car), cash, and even miles you drive on behalf of a charity. With cash and check donations, you'll need documentation such as a receipt or a cancelled check with the date and amount -- if the donation is for less than $250. Donations of $250 or more will require a written receipt from the organization.
5. State and local taxes
This is another deduction that won't be the same beginning with the tax year 2018. Right now, for tax year 2017, you can deduct the state and local income taxes you paid during the tax year or the sales taxes you paid -- but not both. (The IRS offers an online sales tax calculator to help you come up with an acceptable estimate of how much you can deduct. If you go this route, be sure to add in sales tax paid for any major purchases such as a car or refrigerator.) If you pay significant state income taxes, that's probably your better option. But if your state imposes no income tax, or you made an especially big purchase during the year, the sale-tax option might be more beneficial. Beginning with tax year 2018, the deduction for state and local property, income, and sales taxes will be limited to $10,000.
6. Medical expenses
Medical and dental expenses remain potentially deductible this year, next year, and beyond, but the rules are changing a little. For 2017 and 2018, you can only deduct the portion of qualifying expenses that exceed 7.5% of your AGI. So if your AGI is $60,000 and you have less than $4,500 in qualifying medical expenses, you'll get no tax relief. But if you have $7,500 in qualifying medical expenses, for example, you can take a $3,000 deduction. That 7.5% threshold will increase to 10% in 2019.
Either threshold may seem high, but if you spend a lot on medical expenses -- which is not hard to do if your family has a high-deductible health insurance plan and any significant health care issues -- this deduction may still be worthwhile. Among the many expenses that qualify are prescription drugs, smoking cessation program costs, breast pumps and lactation supplies, and even modifications to a house to make it more accessible for a person with disabilities.
7. Losses from investments
It's tempting to avert your eyes from the unrealized investment losses sitting in your portfolio. But if you harvest some or all of them by selling those underperforming assets and taking the capital loss, you can offset capital gains on your taxes. And if you have more losses than gains, you can deduct the remaining loss, up to $3,000, from your income. Beyond that, if there are still losses left over, they can be carried forward to the next tax year.
These are just a few of the many tax deductions -- and tax credits! -- available to us. Read up on them, because the more you know, the more money you may be able to keep in your pocket.
