A List of What I Can Write Off on My Taxes
Filing taxes can be a complicated process, especially when it’s time to dig into credits and deductions. However, doing so is entirely worth the time and effort as it can provide incredible financial benefits.
Still, we know the process can be a bit of a pain. We put together a quick list of tax saving tips to help.
What I Can Write Off On My Taxes: Dependents
If you have children or other dependents that you provide more than half the support for, there are some really good credits and deductions available.
Child Tax Credit
You can claim the Child Tax Credit for your children ages 17 and younger as long as you meet certain income requirements. It’s always best to check the IRS’s website for updated information prior to filing. This is the best way to ensure you are filing according to any potential changes the government makes.
Child and Dependent Care Tax Credit
This is a good option for anyone that has to pay for childcare to work. It allows you to deduct between 20 and 35 percent of your costs.
This means if you pay a daycare facility, a babysitter, a summer camp, or even your mom, you can claim the credit as long as you have their social security or tax ID number and if the child is 12 or under. It does not matter — for the most part — who you pay or how you pay them. I say for the most part simply because if you pay your 15-year-old for watching her little sister, you cannot claim that cost if she is your dependent. However, as long as the sitter is not a dependent on your taxes, you should be fine.
You can also claim elderly family members as dependents if you provide care for them in one way or another — even those that do not live with you. For instance, if you care for your grandmother, you might qualify for this credit. Both you and your elderly dependent have to meet certain requirements to be eligible, which you can read more about in this IRS guide.
Adoption Credit
If you adopt a child or children, you might qualify for an adoption credit. It can help cover nearly $15,950 worth of adoption costs per child. If you adopt four children, you can take the credit for each of those children.
What I Can Write Off On My Taxes: Work and Self-Employment
Whether you work for someone else or work for yourself, you incur some expenses that you can write off on your taxes. We’ll go over them below.
Self-Employment Expenses
Self-employed people can write off expenses incurred during the operation of your business. If you work from home, you have probably heard of the home office deduction. It gives those who work from home the chance to write off expenses related to their business. Unfortunately, not everyone qualifies.
Let’s keep this simple. If you work as a remote employee — meaning that you work from home but are actually employed through a company — your expenses will not qualify. This is only for those who are self-employed.
Now, if you are employed by someone else but have done some freelance work from home throughout the year, you can typically claim expenses related to that work. However, you are limited to that time.
For those who qualify for the home office deduction, you can deduct items such as the following:
A portion of rent or mortgage interest
Utilities related to the business
A portion of your homeowners or renters insurance
Office equipment and supplies
The “portion” you can deduct depends on the amount of your home that you use for your business. If, for instance, you use 3 percent of your home’s square footage for your home office, you should be able to deduct 3 percent of the expenses.
You can also choose the standard home office deduction, which allows you to claim $5 for each square foot of the home used for business. With this, you cannot claim more than 300 square feet, allowing a maximum deduction of $1,500.
In addition to the home office deduction, you can claim other expenses, such as:
Educational resources used to improve your skills — courses, classes, training
Vehicle use — only for mileage used to conduct business
Travel — including meals and hotel stays while traveling for business
Advertising expenses
Keep good records of what you spend to operate your business so that you can take full advantage of self-employment deductions and credits.
Educator Expenses
Most K-12 teachers spend money out-of-pocket for supplies and necessities for their classroom. The good news is that qualifying teachers can deduct up to $250 for these materials. In order to qualify, you must work as an educator for kindergarten to 12th grade, work at least 900 hours at a certified school, and spend money on qualified purchases, such as:
Books
Supplies
Computer hardware, software, or accessories
Athletic equipment — if you are a P.E. teacher
You cannot claim this deduction for any expenses you have already been reimbursed for. For teachers who are married to another teacher, you can both claim the deduction.
Earned Income Tax Credit (EITC)
The Earned Income Tax Credit is intended to provide some relief to moderate and low-income families. To qualify, you must meet the maximum AGI for your family size and filing status, which you can view on the IRS’s website.
You do not have to have children to qualify. However, if you do have children, you qualify for a higher credit than those without children.
What I Can Write Off On My Taxes: Education Expenses
There is no denying that getting an education can break the bank, but you can ease some of the burden by claiming your education expenses. There are a few different ways to do this that we’ll discuss below.
Student Loan Interest
Up to $2,500 paid toward student loan debt can be deducted. This is true whether you pay it or your parents pay it. It used to be that if your parents paid, you could not deduct it on your own taxes.
However, unless they claim you as a dependent, you can now deduct up to $2,500 of what they pay, too. It’s important to note that if you are married, you must file jointly with your spouse to qualify for this deduction.
American Opportunity Credit
If you are an undergraduate, you can claim the American Opportunity Credit for up to four years — if you claim yourself as a dependent. Your parents can claim the credit if you are still considered their tax dependent. The credit is worth up to $2,500 and is valid for up to the first $2,000 in tuition, books, fees, and similar expenses. Living expenses and transportation costs are not eligible.
Lifetime Learning Credit
The Lifetime Learning Credit is for all students — graduates, undergraduates, vocational students, and certification options. It allows you to claim 20 percent of tuition, costs of books and supplies, and fees. However, it can only be claimed on the first $10,000 you spend, meaning that the maximum credit is $2,000.
Like the American Opportunity Credit, you cannot claim living expenses or transportation costs. You can, however, claim it for as many years as you are in school as long as you qualify. The amount of credit will depend on your total modified AGI.
It is important to note that you cannot claim both the American Opportunity Credit and the Lifetime Learning Credit at the same time. However, you can claim one each tax season according to which best suits your situation.
Which One Should You Choose?
As you can claim the Lifetime Learning Credit all throughout your educational journey, you may be wondering which you should choose as an undergraduate. I remember this being a big question when I was in school.
Fortunately, tax software can help answer that question. As you or your tax preparer fill out your taxes, the software will show which credit or credits you qualify for. If it’s both, you can click each of them to determine which will provide you with a better refund.
What I Can Write Off On My Taxes: Health Costs
It can cost a lot of money to take care of yourself, especially if you have any medical conditions. Fortunately, you can write off many of these expenses for you and your dependents.
Some of the most commonly claimed health expenses fit into the following two categories: medical expenses and health insurance premiums.
Medical Expenses
If you have medical or dental expenses that are not reimbursed by a healthcare or employee plan, you can claim them. Currently, you can deduct any expenses that exceed 7.5 percent of your previous year’s adjusted gross income. Some examples of deductible medical and dental expenses include the following:
Hospital stays
Nursing home care
Insulin and prescription drugs
Dentures
Reading or prescription glasses and contacts
Acupuncture
Weight loss programs – Usually only deductible when there is a related diagnosed disease, like obesity. It also usually only covers the program – not the food or health club fees.
Transportation to and from medical and dental appointments
Addiction programs
Payments for appointments with doctors, surgeons, psychiatrists, chiropractors, and dentists
Health Insurance
In addition to medical expenses, many people can deduct health insurance premiums. This is especially true for those that are self-employed. If that’s you, you might be able to deduct the entire cost of your premium as you are completely responsible for obtaining your own coverage.
What I Can Write Off On My Taxes: Charitable Contributions
If you itemize your deductions, you can claim donations that you make to qualifying organizations. These include nonprofit charitable groups, nonprofit religious groups, and nonprofit educational groups.
You can claim both monetary donations and any goods or services you donate. For instance, you can claim the following:
You clean out your closets and give bags of clothes to the local battered women’s shelter.
You have $100 taken out of your account every month that goes to a homeless shelter.
You clean your church or handle the lawn care for no fee.
If you are uncertain whether an organization qualifies, you can look their tax ID number up on the IRS’s website.
What I Can Write Off On My Taxes: Home Expenses
Buying and updating a home can impact your taxes. The following are two of the most common ways.
Mortgage Interest Deduction
If you are paying a home loan, and you itemize deductions, you can deduct the interest paid on the first $750,000 or $1 million of mortgage debt. If you bought the home prior to December 15, 2017, it is the first $750,000. Any time after that is the interest on the first $1 million. This can be for your primary home, a secondary home, or a home you rent out.
Residential Energy Credit
If you have been making your home more energy-efficient, you are in luck. You can claim the Residential Energy Property Credit for 10 percent of the costs of improvements and any residential energy property expenses you paid during the year. The credit has a limit of $500.
Some qualifying expenses include:
Installing solar electric or solar water heater systems
Small wind turbines
Geothermal heat pumps
Some solar roofing supplies
Energy-efficient windows and doors
Energy-efficient HVAC
This credit is expected to end after December 31, 2021, though it might be extended again.
What I Can Write Off On My Taxes: Other
There are always ways to decrease your tax liability and optimize your potential refund.
In addition to those listed above, many people receive credits for contributing to their retirement accounts or a college savings plan.
Others are able to write off a gambling loss.
Some who sell their homes are able to avoid the capital gains tax as long as the sale is under a set amount.
With so many ways to improve your tax situation, the first and most important thing to do is focus on keeping good records. By tracking your financial movements throughout the year, you can simplify your life and ensure the best results.
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Conclusion
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