The clock is ticking. April’s looming, and the mountain of tax forms on your desk seems to grow taller by the minute. Sound familiar? We’ve all been there – that last-minute scramble to file taxes before the deadline. But don’t worry, you’re not alone, and it’s not too late.
We’ve put together some tips to help you maximize your deductions before April 15th. We’ll guide you through some commonly overlooked deductions and provide strategies for getting your paperwork in order, so you can minimize your tax liability and breathe a sigh of relief. After all, every deduction you claim is money back in your pocket – and that’s something worth fighting for, even at the eleventh hour.
Commonly overlooked deductions
Finding and claiming all the deductions you’re entitled to is a great way to save money on your taxes. When you’re rushing to file, it’s easy to miss deductions you’re entitled to. Remember, you can choose between the standard deduction and itemizing – whichever lowers your taxable income. Tax laws change, so double-check the latest IRS guidelines. Here are some commonly overlooked deductions:
Standard deduction
The standard deduction is a fixed dollar amount based on your filing status. For many, especially those who don’t have a lot of deductible expenses, the standard deduction is the best choice, it’s also the easier and quicker option. Even those filing the standard deduction may be able to claim these additional deductions:
Charitable contributions (cash and non-cash)
Even if you don’t itemize, you can still deduct some charitable donations. The CARES Act allowed taxpayers to deduct up to $300 in cash contributions to qualifying charities, even if they take the standard deduction. This applies per taxpayer, so married couples filing jointly can deduct up to $600. Remember to keep records of your donations.
State and Local Taxes (SALT)
This is a tricky one. While most people who itemize deduct state and local taxes, those who take the standard deduction often forget they might have some deductions here too. This is especially relevant if you live in a state with no income tax but high property taxes or sales taxes. However, keep in mind that the total deduction for state and local taxes is capped at $10,000 per household.
Student loan interest
You can deduct up to $2,500 in student loan interest, even if you don’t itemize. This is an “above-the-line” deduction, meaning it reduces your adjusted gross income (AGI) before you take the standard deduction. However, there are income limitations and other eligibility requirements, so be sure to check the IRS guidelines.
Health Savings Account (HSA) contributions
If you have an HSA, contributions to it are tax-deductible, even if you don’t itemize. This is another “above-the-line” deduction that can reduce your AGI.
IRA Contributions (traditional)
Contributions to a traditional IRA are often tax-deductible, even if you don’t itemize. Again, this is an “above-the-line” deduction. However, there are some limitations depending on your income and whether you’re covered by a retirement plan at work.
Itemized deductions
Itemizing means listing out all your eligible deductions. If your eligible deductions exceed the standard deduction, itemizing is the way to go, even though it does take more time to do. Even when people intend to itemize, it’s easy to overlook some deductions, especially when rushing to file. Here are some commonly missed itemized deductions:
Medical expenses
Many people underestimate how much they can deduct. You can deduct qualified medical expenses exceeding 7.5% of your adjusted gross income (AGI). This includes costs for doctor visits, hospital stays, prescriptions, certain medical equipment, and even transportation costs. Keep all those receipts. Even if you think you’re below the threshold, tallying them up might surprise you.
Charitable contributions (non-cash)
Cash donations are usually remembered, but people often forget about non-cash donations to qualified charities. These include clothing, household goods, furniture, and even vehicles. It’s important to keep good records of these donations, including a description of the items and their fair market value. For donations over $500, you’ll need additional documentation.
Home office deduction (if applicable)
If you have a dedicated space in your home that you use exclusively and regularly for your business, you might be able to deduct expenses related to that space. The rules for this deduction can be complex, so make sure you understand the requirements.
Educator expenses
Eligible educators can deduct up to $300 in unreimbursed classroom expenses. This is a relatively small deduction, but it can add up if you spend a lot of your own money on supplies for your students.
Deductions based on life events
Life changes often bring tax implications, and you might be eligible for deductions you didn’t know about. If any of these major life events occurred during the tax year, it’s worth exploring how they might affect your deductions:
Marriage/divorce
Your marital status on December 31st determines your filing status, which in turn impacts your standard deduction and eligibility for certain deductions and credits. Getting married might mean you qualify for deductions you didn’t before, while divorce can change your filing status and potentially impact deductions related to dependents.
Birth/adoption of a child
Welcoming a new child into your family not only brings joy but also potential tax benefits. The Child Tax Credit can significantly reduce your tax liability. There may also be other deductions or credits related to childcare expenses, adoption costs, or dependent care.
Moving expenses (if applicable)
While generally not deductible, moving expenses may be deductible if the move is related to military orders. If this applies to you, carefully review the IRS rules and documentation requirements.
Organization and documentation
It’s important to organize all your tax documents, especially if you’re in a rush. It’ll save you time and make sure you don’t miss any deductions. Start by gathering all your tax-related documents in one place. This includes receipts, tax forms (W-2s, 1099s, etc.), bank statements, and any other relevant paperwork. Sort everything by category (income, deductions, etc.) to make it easier to find what you need.
If you’re itemizing, gather all receipts for deductible expenses, such as medical bills, charitable donations, and business expenses (if applicable). Even if you’re taking the standard deduction, it’s a good habit to keep these receipts organized in case your financial situation changes in the future.
Tax filing options
When you’re short on time, filing by paper through the mail may not be the best option. It takes longer to do, and there’s a greater chance of errors due to manual entry. Fortunately, there are several options available to last-minute filers, including e-filing, tax software, and seeking assistance from a tax professional.
E-filing
E-filing is the fastest and often most convenient way to file your taxes. It’s generally more accurate than paper filing and you’ll typically receive your refund faster. Most tax software and tax professionals offer e-filing services.
Tax Software
These programs guide you through the tax preparation process, calculate deductions and credits, and help you file electronically. They can also help you find deductions and credits that you may be eligible for.
Tax Professionals
If your tax situation is complex (self-employment income, investments, etc.) or if you’re simply overwhelmed by the process and really short on time, consider seeking help from a qualified tax professional like a CPA or enrolled agent. They can ensure you’re taking advantage of all applicable deductions and credits and can handle the filing process for you.
Filing for an Extension
If you absolutely cannot file by the deadline, you can file for an automatic extension. However, an extension to file is not an extension to pay. You still need to estimate what you owe and pay that amount by the April 15th deadline to avoid penalties. The extension simply gives you more time to get your paperwork together and file the complete return. If you underestimate what you owe, you could still face penalties and interest on the unpaid amount.
Use these tax filing tips before it’s too late
Don’t let the pressure of tax season overwhelm you. You still have time to complete your taxes before the deadline and make sure you take advantage of the deductions you qualify for. Take a deep breath, review these tips, and take action!
