You might not want to hear this, but it’s already time to start thinking about tax preparation. Although April feels far away, the earlier you begin planning your tax filing, the more likely it is you’ll take advantage of all the tax breaks that tax year 2017 has to offer.
The IRS has already updated this year’s tax brackets, but that’s not the only change that affects you. To make it easier for you to understand how you’ll be affected, GOBankingRates put together this list of tax deductions. Take advantage of the best tax deductions that can save you money and lower your taxable income.
1. Medical and Dental Expenses
You can deduct medical and dental expenses for yourself, your spouse and your dependents if your total expenses exceed 10 percent of your adjusted gross income. If you or your spouse is age 65 or older, you can deduct total medical expenses that exceed 7.5 percent of your adjusted gross income.
2. Tax Preparation Fees
Whether you do your own taxes with a tax calculator or pay someone to do them, you can write off the fees on your miscellaneous tax deductions list. Costs can include tax return preparation and electronic filing fees. In order to qualify, however, the preparation fees must exceed 2 percent of your AGI.
3. Home Renovation Deduction
Typically, home renovation costs are not deductible on your tax return. If you make improvements to your home for medical purposes, however — such as adding wheelchair ramps or lowering cabinets for better accessibility — you can deduct those renovations as medical expenses. If the renovations are made to increase the value of your home, however, you can’t claim them as medical-related expenses.
4. Job Search Expenses
If you’ve been looking for a job and it cost you money, make sure you add those expenses to your list of tax write-offs. If you itemize, you can deduct expenses you incurred during a job search, but you must have searched for the same line of work as your current or most recent job. Expenses related to looking for work that you can deduct include:
- Transportation, which includes a deduction of 54 cents per mile, parking, tolls and cab fees
- Preparing, printing and mailing out your resume
- Fees related to job searches
- Employment agency fees
5. Hobby Expenses
If you’re wondering, “What can I claim on my taxes?” and you have a hobby, pay attention: You can deduct some ordinary expenses you incur from a hobby. Unlike a business, a hobby is an endeavor from which you do not expect to profit. If you suffer a loss due to a hobby, you cannot deduct the loss from your income.
6. Local and State Sales Tax
Taxpayers have the option of deducting either state and local income taxes or state and local general sales taxes they paid during the tax year, but not both. If you live in a state with no income tax, consider deducting state sales tax and local sales taxes that you paid.
7. State, Local and Foreign Taxes
You can claim certain taxes as itemized deductions. Apart from state and local sales tax, you can also deduct:
- Local and state personal property taxes
- Foreign, local and state real estate taxes
- Foreign, local and state income taxes
8. State Balance Due
You might have owed additional taxes on a prior year’s state return and paid for them in a later tax year. If that’s the case, you might be able to deduct the taxes you paid.
9. Jury Duty Pay
If you gave your jury pay to your employer because you were paid your salary while you served on a jury, you can deduct your jury pay from your taxable income.
10. Early Withdrawal of Savings Penalty
If you withdrew your money early from a certificate of deposit, individual retirement account or similar account or investment, the penalty you paid could qualify as a tax deduction, even if you don’t itemize deductions on your 1040. Note that this is not the same as the capital gains tax.
11. Volunteer Work Donations
You can deduct certain expenses for charity work, like the cost of gas and oil if you use your car to get to and from the place you volunteer. If you don’t want to calculate the value per mile, you can deduct a standard rate of 14 cents per mile. You can also deduct the cost of purchasing and maintaining uniforms you wear to a place you volunteer or parking in a garage if that’s required.
12. Bad Debt Deduction
If you lent money that you never got back, it’s considered a bad debt, which might make you eligible for a tax rebate. Generally, to deduct a bad debt, you must have previously included the amount in your income or loaned out cash. You must also show that you attempted to collect the debt and that there’s no chance you’ll be able to recoup it.
13. Moving Expenses
If you meet the IRS distance and time tests after you relocate for a new job, you can take a moving-expense deduction. Military personnel who were required to move as part of their service obligations do not have to satisfy any distance or time qualifications.
14. Airline Baggage Fees
If you’re self-employed and you travel for business, make sure you deduct your baggage fees. You might be surprised how fast they add up — and how much they end up costing.
15. Mortgage Interest Deduction
Although proposed tax reform could change this, most taxpayers who itemize are eligible to deduct the interest they paid on their mortgages. You can deduct the interest you paid on loans of $1 million or less, but if you’re married and filing separately, you can deduct the interest only on loans of up to $500,000.
16. Mortgage Points
If you itemize, you can deduct the points — or prepaid interest — you paid to purchase or build your primary home. Typically, if you can deduct all the interest you paid on your mortgage, you can also deduct all of the points.
17. Home Appraisal Fees
You cannot deduct appraisal fees if they went toward the purchase of a home. You can deduct them as a miscellaneous itemized deduction, however, if the property was part of a charitable donation.
18. Home Sale
If you sold your home at a profit, you can exclude up to $250,000 of gains from your income. If you’re married and filing jointly you can exclude $500,000.
19. Self-Employed Health Insurance
Health insurance is tax-deductible for self-employed taxpayers. If you were self-employed in 2017, you can deduct premiums you paid for medical and dental insurance, as well as for qualified, long-term care insurance.
20. Fees to Collect Interest and Dividends
Any fees you paid to a broker, bank, trustee or similar agent to collect taxable bond interest or dividends on shares of stock are deductible. Keep in mind the actual stocks, bonds or securities are not deductible.
21. Investment Fees and Expenses
Certain fees you pay to manage your investments qualify as a miscellaneous deduction. The costs include:
- Fees for investment counseling
- Custodial fees you paid outside of the account
- Software and online services you used to manage investments
- Safe deposit rental fees
- Transportation costs to and from an investment or financial advisor’s office
- Attorney costs you used to collect taxable income
- Costs to replace lost security certificates
22. IRA Losses
You can claim losses on traditional and Roth IRAs as a miscellaneous itemized deduction, but only in rare cases. For Roth IRAs, all accounts must be closed, including those that earned a profit. You won’t need to close a traditional IRA — it is treated separately. You must show a loss from your tax base to qualify.
23. Repayment of Income
If you had to repay income that you included in ordinary income in an earlier year, you might be able to deduct the repaid amount. In most cases, you can claim a deduction only for repayment of income if your repayment qualifies as an expense or loss you had at your business, trade or in a transaction.
24. Legal Fees
If you itemize, you can deduct certain legal fees related to doing or keeping your job, collecting taxable alimony or any fees you spent for tax advice. The fees, however, must total 2 percent of your AGI.
25. Gambling Losses
Gamblers might be able to recoup some of their losses at tax time. Winnings from gambling are taxable and must be reported. If you suffered gambling losses, you can deduct up to the amount of gambling income you reported. You can claim your losses as an “other miscellaneous deduction,” but be prepared to show proof of those losses.
26. Safe Deposit Box Rental Fees
You can deduct safe deposit box fees you paid for storing documents and items that are reasonably related to tax-related investments like stocks and bonds. You cannot deduct the fees for storing valuables like jewelry.
If you paid alimony in 2017 as part of a divorce or separate maintenance decree, you can deduct the amount you paid. Your payments qualify as alimony if:
- You and your spouse or former spouse do not file jointly.
- Payments were made with cash, check or money order.
- You are legally separated and don’t live in the same household as your former spouse.
- Child support is not part of your payment.
- Payments went to your spouse or former spouse.
28. Car Registration Fees
If you meet certain requirements, you might be able to include some or all of your vehicle registration fees in your tax deductions. If part of your registration is deductible, you must itemize your deductions.
29. Casualty, Disaster and Theft Losses
It’s terrible to experience a loss related to your home, household items or vehicles. If your insurance doesn’t cover an item, at least it’s deductible.
30. Military Reservist Travel Expenses
If you travel more than 100 miles from your home as a military reservist, you can subtract travel expenses from the income you report on your tax return. Qualifying expenses include transportation, meals and lodging, with some exceptions.
31. Health Savings Account Contributions
Health savings accounts are tax-exempt accounts you use to pay or reimburse certain medical expenses. You can claim a tax deduction on contributions you or someone other than your employer made to your account.
See: Why You Need an HSA
32. IRA Contributions
Although IRS rules don’t allow deductions for Roth IRA contributions, you might be able to claim the amount you put in a traditional IRA, as long as you or your spouse doesn’t have an employer-based retirement account. You can take a deduction up to the full amount of allowable contributions, which is $5,500, or $6,500 if you are 50 or older.
33. Personal Exemptions and Dependents
For personal exemptions and dependents, you can deduct up to $4,050 for tax year 2017, which is the same as it was in 2016. There are, however, income limits on this deduction.
34. 401k Contributions
401k plans provide special tax status for retirement savings and immediate tax benefits. When you contribute to your 401k, you’ll effectively lower the amount of your taxable income, so there’s a smaller impact on your take-home pay.
35. Dependent Care Flexible Spending Account
A dependent-care flexible spending account lets you set aside pretax money for expenses related to caring for a child — this is not the same as the child tax credit, which you use for a disabled spouse, parent, or other mentally or physically handicapped dependent. You’re allowed to contribute up to $5,000 tax-free toward an FSA every year.
Whether you take the standard deduction or itemize, you can deduct up to $4,000 in qualifying higher education tuition and fees you paid for yourself, your spouse or a dependent for tax year 2017. If you’re married but filing separately — or if another person can claim an exemption for you as a dependent — you don’t qualify for this deduction.
37. Union Dues
You can deduct union dues, initiation fees and other related expenses from taxable income. The deductions, which are considered nonreimbursed employee expenses, are subject to the 2 percent AGI rule.
38. Work Uniforms
If your employer requires you to wear clothes that aren’t suitable for everyday wear, you can claim their cost as a deduction. Common items you can deduct include theater costumes, military uniforms and protective clothing.
39. Home for Business Use
You can deduct certain expenses for using a part of your home for business. To qualify for this deduction, you must use part of your home for one of the following:
- Primary location for trade or business
- Main location for meeting with patients or clients
- Storage facility for inventory or product samples for your business or trade
- Rental use
- Day care facility
40. Car for Business Use
If you use your car for your job or business, you might be able to deduct the costs. You can either use a standard mileage rate or the actual-expense method, which is what it actually costs to operate the car for its business-use portion.
41. Business Travel Expenses
You might be able to deduct certain nonreimbursed business expenses you incur while traveling for work. Costs could include transportation, baggage fees, meals, lodging, laundry and business calls. Any expenses that are considered extravagant or lavish don’t qualify for the business travel expenses deduction.
42. Educational Expenses
Under the American Opportunity Tax Credit you can deduct up to $2,500 per student for four years of post-secondary education. Good news: The credit has now been made permanent.
43. Employee Business Expenses
If you itemize, some local transportation costs are deductible as well as certain business entertainment and gift expenses. Make sure you keep receipts for your expenses if you take these deductions.
44. Earned Income Tax Credit
The earned-income tax credit is a commonly overlooked tax credit for low- to moderate-income individuals. Although it’s not considered an IRS deduction, the EITC is a refundable tax credit meant to supplement income. In 2017, the amount ranges from $510 to $6,318.
45. Educator Expenses
K-12 educators can deduct up to $250 of unreimbursed expenses for books, supplies and computer equipment. To qualify, you must work 900 hours in a school year. Deductions can go up to $500 for married couples filing jointly if both parties are educators who incurred expenses.
46. Student Loan Interest Deduction
You can deduct some or all of any qualified student loan interest you paid during the tax year. You can deduct the lesser of $2,500 or the amount you actually paid. You can’t claim the deduction if you’re married and filing separately or if you or your spouse is listed as a dependent on someone else’s tax return.
47. Cash Donations
You can deduct cash donations to IRS-approved charities for up to 50 percent of your adjusted gross income. You must have written records of donations to deduct cash gifts in any amount — a copy of a bank record or statement from the organization will work.
48. Noncash Donations
If you itemize, you can claim the fair market value — the price for which you otherwise could have sold the items — of clothing and household items you donated. If you plan to donate your car, make sure you donate to a qualified charity, like as a 501(c)(3).
49. Senior Tax Deduction
Here’s some good money news for seniors: If you and your spouse were 65 or older by the end of the tax year, you’re eligible for a higher standard deduction.
50. Standard Tax Deduction
Even if you don’t have a lot of itemized deductions to file, you still qualify for a standard deduction, which has increased to $12,700 for married couples filing jointly on income earned in 2017. For single filers and married couples filing separately, the deduction is now $6,350. If you file as head of household, you can deduct $9,350.