15 Hidden Tax Deductions You Can Claim Without the Hassle of Itemizing!
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Tax season feels like a maze of numbers, rules, and paperwork, but what if you could decrease your taxable income without going through the trouble of itemizing? The Internal Revenue Service (IRS) reports that nearly 90 percent of taxpayers take the standard deduction rather than itemize it and still save lots of money in taxes. For the 2024 tax year, married couples filing jointly will take advantage of a standard deduction of $27,700, which can significantly ease your tax bill.
There are even more hidden tax deductions that could save you money, and many of them don’t require itemizing. Often overlooked deductions can reduce your taxable income whether you’re a teacher, a student, self-employed, or even a parent. Read on to find out 15 hidden tax deductions to help you keep more of your hard-earned cash.
Standard Deduction
A standard deduction is a certain amount you can take away from your income before taxes are calculated. Single filers can declare $13,850 as their standard deduction and $27,700 for married couples filing jointly for the 2024 tax year.
This tax deduction can simplify your tax process; you’ll no longer need to itemize a single deduction, which can significantly reduce your taxable income.
Retirement Contributions
Sometimes, contributions to retirement accounts, including 401(k) plans, IRAs, and SEP IRAs, are deductible. For example, contributions of up to $6,500 if you are under 50 or $7,500 if you are 50 or older can be deducted from a traditional IRA.
Contributions grow tax-deferred until withdrawal from these deductions, which reduces your taxable income for the year.
Student Loan Interest
A taxpayer who repays a student loan can deduct up to $2,500 of the interest paid on that student loan. You don’t have to itemize your deductions to take advantage of this deduction, and it’s available if your modified adjusted gross income (MAGI) is less than $85,000 ($170,000 for married couples).
Most importantly, the deduction can help those in the early years of repayment, when the interest is the highest.
Charitable Contributions
Typically, charitable donations are claimed as itemized deductions. However, you can still claim up to $300 ($600 for married couples) in cash contributions to qualifying organizations without itemizing.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act brought this provision, and the Consolidated Appropriations Act of 2021 made it permanent. This is especially valuable for many people who donate to charity but whose deductions aren’t high enough to make itemizing worthwhile.
Educator Expenses
Teachers and educators can deduct up to $300 without itemizing out-of-pocket classroom expenses. This deduction is for any K-12 teacher or educator working at least 900 hours a year in an elementary or secondary school.
Moreover, if both spouses are eligible as married couples, the deduction can increase to $600.
State Sales Tax
You can deduct state sales tax instead of state income tax if your state does not impose a state income tax. Fortunately, the IRS has a sales tax deduction calculator to help you determine how much you can claim.
Therefore, this option is the best for states like Florida, Texas, and Washington, where people do not have to pay income taxes but pay too much sales tax.
Child Tax Credit
The Child Tax Credit gives up to $2,000 for each child under age 17, $1,500 of which could be refundable. You can get this credit even if you don’t itemize your deductions.
In 2024, the credit begins to phase out for taxpayers with incomes above $200,000 for single filers and $400,000 for married couples filing jointly.
Self-Employed Health Insurance
Those that are self-employed can deduct 100% of their health insurance premiums, including that of their spouse and dependents. This deduction also applies even if the person does not itemize their deductions.
This includes premiums for medical, dental, and long-term care insurance paid for 2024, and it can be a good tax break for freelancers and small business owners.
Moving Expenses for Active-Duty Military
You may be able to deduct your unreimbursed moving expenses if you are a member of the armed services on active duty whose move is due to a permanent change in station PCS). That includes moving household goods, personal effects, and transportation costs (including lodging).
Military families can take advantage of these deductions because you can claim them without itemizing.
Mortgage Insurance Premiums
Those with a mortgage with private mortgage insurance (PMI) may be able to deduct the premiums they paid. This deduction is available to taxpayers with adjusted gross income of no more than $100,000 ($50,000 for married individuals filing separately) for 2024.
Mortgage insurance premiums paid on loans used to buy, build, or improve a primary or secondary home can be claimed as a deduction.
Dependent Care Benefits
Parents who pay for child or dependent care while they work, even if they don’t itemize, can deduct up to $3,000. This deduction applies to children under 13 or if other dependents are physically or mentally incapable of self‐care.
According to the IRS, taxpayers can deduct up to 35% of their qualifying expenses based on their income.
Health Savings Account (HSA) Contributions
Money put into an HSA is deducted from your taxable income, and it can grow tax-free when used for medical expenses. For the 2024 tax year, Health Savings Account (HSA) contributions are limited to $4,150 for individuals and $8,300 for families.
Catch-up contributions are $1,000 in addition to individuals who are 55 years or older. Unlike flexible spending accounts (FSAs), these contributions lower your taxable income this year, and any unspent money can roll over from year to year.
Qualified Business Income Deduction (QBI)
The Tax Cuts and Jobs Act (TCJA) announced the Qualified Business Income (QBI) Deduction, which allows qualified self-employed individuals and small business owners to deduct up to 20% of their qualified business income.
The tax deduction applies to pass-through entities, including sole proprietorships, partnerships, corporations, and some rental income. It’s available even if you don’t itemize, but there are income thresholds that can reduce or wipe out the deduction.
Unreimbursed Employee Expenses
Although the Tax Cuts and Jobs Act of 2017 largely eliminated the ability for most employees to deduct unreimbursed employee expenses, certain workers can still take advantage.
For instance, self-employed workers and independent contractors can deduct expenses related to the business like supplies, home office expenses, and professional memberships. Self-employed workers do not need to itemize these, reducing taxable income.
Job Search Expenses (Self-Employed)
When looking for a new job in the same occupation you held previously, you might be able to deduct some job search expenses without going through the trouble of itemizing. These expenses can be resume preparation, travel costs, and employment agency fees.
That said, with the Tax Cuts and Jobs Act, this deduction has effectively been revoked for most taxpayers, but it hasn’t been abolished for self-employed individuals.
Disclaimer – This list is solely the author’s opinion based on research and publicly available information.
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