6 Overlooked Tax Deductions for Families

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Managing family finances can be a complex task, and when tax season rolls around, it becomes even more challenging. Many families overlook valuable tax deductions that could save them significant amounts of money. Here’s a list of six often-missed tax deductions that can benefit families.

1. Child and Dependent Care Credit

• What It Is:
  • This credit is for expenses paid for the care of children under age 13 or a disabled spouse or dependent so you can work or look for work.
• How It Helps:
  • It can cover a percentage of up to $3,000 of childcare and similar costs for one dependent, or up to $6,000 for two or more.

2. Earned Income Tax Credit (EITC)

• What It Is:
  • A benefit for working people with low to moderate income, especially those with children.
• Key Benefit:
  • The credit amount varies based on income and family size, and it can result in a significant refund.

3. Education Credits

• Types of Credits:
  • The American Opportunity Tax Credit and the Lifetime Learning Credit help with higher education costs.
• Benefit Details:
  • These credits cover expenses like tuition, books, and other supplies. The American Opportunity Tax Credit, for example, offers up to $2,500 per eligible student.

4. State Sales Tax Deduction

• What It Is:
  • This deduction is for state and local sales taxes, instead of state and local income taxes.
• Ideal For:
  • It’s particularly beneficial for families living in states that don’t impose an income tax.

5. Medical and Dental Expenses

• What It Covers:
  • Expenses that exceed 7.5% of your adjusted gross income can be deducted.
• Examples:
  • Costs can include preventative care, treatment, surgeries, dental and vision care, psychologist and psychiatrist visits, and prescriptions.

6. Charitable Contributions

• Not Just Cash:
  • While cash donations to a qualified charity are deductible, don’t forget about property donations and out-of-pocket expenses incurred while doing charity work.
• Pro Tip:
  • Keep receipts and records of any charitable contributions throughout the year.

Maximizing Your Family’s Deductions

• Stay Organized:
  • Keep meticulous records of all expenses that could qualify for deductions.
• Understand Eligibility:
  • Tax laws change frequently. Ensure you’re up-to-date or consult with a tax professional.
• Plan Ahead:
  • Some deductions, like those for energy-efficient home improvements, require planning and should be considered well before tax season.

Conclusion

For families navigating the complexities of tax deductions, awareness is key. By understanding and taking advantage of these often-overlooked deductions, families can significantly reduce their tax burden, leading to potential savings and a healthier financial situation. Remember, when in doubt, consulting with a tax professional can provide clarity and ensure you’re maximizing your family’s tax benefits.

Editor's note: This article was produced via automated technology and then fine-tuned and verified for accuracy by a member of GOBankingRates' editorial team.

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