“Can a dead person deduct medical expenses?”
“Can I claim my pet as a dependent? What about my au pair?”
These are just a few of the numerous requests Andy Phillips, director for the Tax Institute at H&R Block in Kansas City, Missouri, fields when tax time rolls around, as his clients muddle their way through what can and can’t count as a deductible expense. And it’s really a worthy endeavor—one he says “absolutely” adds up.
“We’re all about maximizing your profits and ensuring that the playing field is even for everyone, not just during tax season but throughout the year,” he says. “We have so much love for taxes because we get to help filers maximize returns and learn about their finances. Whether it’s the Child Tax Credit for parents, the EV credit for clean car drivers or an energy tax credit for homeowners, these can all make a huge difference both during and beyond tax season.”
Commonly overlooked tax deductions to maximize your returns
So, even though Phillips has to tell some people their pet isn’t going to qualify for that Child Tax Credit, there are plenty of commonly overlooked deductions to make sure you aren’t missing this tax season.
1. Home improvements
“Many homeowners don’t realize that certain home improvements may be tax deductible, as long as they improve the energy efficiency of your home. Through the U.S. government’s Energy Efficient Home Improvement Credit, homeowners can claim tax credits that offset the cost of conducting a home energy audit or investing in energy-efficiency upgrades like adding insulation, heat pumps and heat pump water heaters,” says DR Richardson, co-founder of Elephant Energy. “Also, some states, cities and utilities have their own programs that provide additional incentives, meaning you could potentially save even more. Work with a knowledgeable electrification partner to ensure that you are maximizing all of the rebates and tax credits available to you.”
2. Office expenses and supplies
Paul Miller, managing partner and CPA at Miller and Company, LLP in New York, says amidst the complexities of the tax code, this write-off is often overlooked. “Educators can claim up to [$300] for classroom-related expenses, while student loan interest deductions offer relief for borrowers. Additionally, self-employed individuals can leverage deductions for home office expenditures and health insurance premiums. Identifying and properly utilizing these deductions can significantly impact tax liabilities.”
3. Solar panels
Dr. Qianzhi Jiang, owner of The Nutrition Changer in the Greater Boston area, is a registered dietitian/nutritionist who has a private practice. “I work from home and use my home garden for nutrition education a lot. I recently learned that structures on my home office property including greenhouses are eligible for tax deductions,” she says. “Associated expenses such as the installation of solar panels on the greenhouse may also be eligible for additional tax credit. Dietitians involved in gardening or sales of greenhouses may benefit from this.”
4. Business income
Gerry Poirier, founder and CEO of AngeLink, an AI-powered crowdfunding platform powered by women in Miami, says the Qualified Business Income Deduction is a commonly overlooked tax deduction that comes with the Tax Cuts and Jobs Act of 2017.
“It allows self-employed business owners or partnerships to deduct 20% of their qualified business income. When I first got introduced to it, I thought that it was too good to come true. A deduction that is right off the top of your business income,” she says. “After working with a tax professional, it majorly reduces our taxable income. This further freed up more resources that we could reinvest back into our businesses, from hiring the staff to improving the technology of our platform.”
Poirier adds that, for her, tax codes are basically like a treasure map that helps increase savings. “It was a gentle reminder that in businesses, there are new opportunities that you can optimize. You just have to keep an eye out for these opportunities.”
5. Phone and internet
“Most business owners we deal with do not know they can claim their home internet as well as their cell phone expenses based on usage,” says Christian Maldonado, co-founder and COO of Finsult, a company offering full-suite accounting services for online creators and businesses. “For example, if you’re a salesperson and most of your outreach, interactions with clients or closing of deals is done on your phone… you could be eligible to write off the entire bill each month through your business as it’s a necessary expense for the continual operation and pursuit of income. Internet and at-home Wi-Fi falls into the same realm if you work from home and the internet is needed for you to operate your business (on the computer or phone). This can amount to a few thousand dollars in deductions a year, so be sure to account for them.”
6. Retirement savings
Dr. Shatonya Rosie Thomas, founder of Thomas Financial Services in Garland, Texas, says this is the most overlooked tax credit “by far.”
“The Retirement Saver’s Credit is one of the most frequently overlooked tax breaks, and it can be worth up to $1,000 for single filers and $2,000 for married couples filing jointly,” she says. “You may be able to take a tax credit for making eligible contributions to your IRA or employer-sponsored retirement plan. Also, you may be eligible for a credit for contributions to your Achieving a Better Life Experience (ABLE) account if you’re the designated beneficiary.” She adds those over 18 who aren’t students or listed as a dependent on another tax return are eligible.
And a few unusual tax laws to know
Phillips points out a few lesser-known tax laws to consider:
- Menstrual care products like tampons and pads are qualified expenses you can pay with your health savings account (HSA). 223(d)(2)(D).
- If you win money playing fantasy sports, that’s taxable income.
- Even though medical marijuana is legal in many states, you can’t deduct it as a medical expense or pay for it with your HSA.
- If you build a house, you may be eligible to deduct certain construction expenses including land, materials, architect fees, building inspection fees and building permit fees.
- If you install an electric vehicle charger in your home, you may be eligible for a tax credit.
- If you’re at least 65 years old or blind, you can claim an additional standard deduction on your tax return.
- Americans living abroad get an extra two months to file taxes; their deadline is June 15 unless it falls on a weekend or holiday. In that case, the deadline defaults to the next business day.
- People who are wrongfully incarcerated may be able to exclude settlement money they receive to compensate them.
- If you’re just starting to repay your student loans for the first time, you might not know that most taxpayers can deduct up to $2,500 of student loan interest payments each year.
As with any financial advice, be sure to consult with your own tax adviser to consider if you qualify for these unexpected tax deductions before filing. But, with a little know-how, you will hopefully find yourself with a larger-than-last-year tax return this season.
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