There are many tax-saving opportunities that people miss because they don’t know about them. Don’t overpay taxes when you may be eligible for deductions. Take a look at the most overlooked tax deductions for more information.
State Tax Paid for the Previous Year
Did you owe taxes when you filed your 2022 state tax return in 2023? If so, remember to include that amount with your state tax itemized deduction on your 2023 return. You should also include state income taxes withheld from your paychecks. As of 2018, the deduction for state and local taxes is limited to a maximum of 10,000 dollars per year.
Out-of-Pocket Charity Donations
Most people remember large charitable donations, but it’s important to remember smaller ones, too. For instance, you may be able to write off a school supply donation on your taxes. The IRS lets you claim a deduction to qualifying organizations, which includes schools and nonprofit charities. The amount you deduct is equal to the value of all cash and property you donate.
Please keep in mind that donor gifts reduce your deduction. For example, if you donate 4,000 dollars and the school gives you a 200-dollar gift card to a retail store, you must reduce your deduction to 3,800 dollars. The only exception is if the school gives you a gift of minimal value.
Moving Expenses for Military Personnel
If you’re an active-duty military member who’s relocating, you can deduct moving expenses. However, you can deduct money only if you don’t receive reimbursement from the government. Furthermore, as long as the move is permanent and ordered by the military, you don’t have to pay tax on qualified reimbursements.
Jury Pay Given to Your Employer
Many of us undergo jury duty at some point. Many employers pay the worker’s full salary while they serve jury duty. In some cases, workers must turn over their jury pay to their company if the company pays the employee’s salary during jury duty.
The IRS requires you to report jury pay as income, and you can claim a tax deduction for jury pay you returned to your employer.
Student Loan Interest Paid by Parent
Student loan interest paid by a parent is one of the most overlooked tax deductions to know. Typically, you can only deduct interest if you legally have to repay the debt. However, if a parent pays back a child’s student loans, the IRS sees the transaction as if they gave you the money, and you paid the debt yourself.
It’s important to note that a child no longer claimed as a dependent can deduct up to 2,500 dollars of student-loan interest paid by their parent each year.