Broker Check

Overlooked Tax Deductions

March 12, 2024

Want to save money this tax season? Don’t overlook these deductions:

Tax season. It’s the time of year that almost everyone loves to hate. The only fun thing about tax season is finding ways to successfully reduce your tax bill and keep more money in your pocket. Luckily, these tax deductions can be the perfect way to save money and reduce your tax burden.

Catch-up contributions

If you're 50 or older, you can contribute more money to your retirement savings using what’s known as catch-up contributions. These added retirement contributions are to help older people save more money for the future as they get closer to retirement. The best part is that these contributions get the same tax benefits as the rest of your IRA, 401(k), or other retirement account contributions.

Mortgage interest

Your mortgage is likely your largest monthly expense. One way to ease this burden is by deducting your mortgage interest. Because mortgages are usually structured to pay more interest earlier, this deduction is usually higher the earlier you are in your mortgage. Keep in mind, that this deduction is limited to the first $750,000 of debt (or $375,000 if married filing separately).

Medical expenses

Medical issues tend to increase as you age. This could cause you to spend a significant amount of your savings on medical expenses. Currently, the IRS allows you to deduct medical and dental expenses that aren’t reimbursed by your insurance provider if they exceed 7.5% of your adjusted gross income (AGI). Also, if you pay for medical expenses to treat your spouse or a dependent, you can include those expenses in this deduction.

Investment losses

No one likes losing money on an investment. But if you did lose money investing, at least you can deduct some of your losses from your tax return. If on the whole, you’ve had a net loss on your investments for the year, you can deduct up to $3,000 on your taxes. If your losses exceed $3,000, you can carry them over to subsequent years to be deducted.

For example, let’s say you had a bad year investing and overall lost $5,000 in the market. This means you could deduct $3,000 this year, and carry over the remaining $2,000 to be deducted next year.

Casualty and theft

If you’re recovering from a theft, fire, vandalism, or other unexpected event, remember that you can deduct certain losses you’ve incurred. While hopefully some of your losses or damaged items are covered by insurance, for those that aren’t, you can deduct losses up to 10% of your AGI. If your insurance company covers part of a loss, you can deduct the uninsured expense on your taxes. For instance, if your home was damaged during a natural disaster and the cost was $10,000, if your insurance will only cover $8,000, you will be able to deduct the remaining $2,000 out-of-pocket expense.

Use deductions to your advantage

Tax deductions were created to reduce the amount of your taxable income, and they are there for you to use. As long as you qualify for these deductions, it’s only to your own benefit to take advantage of them. This can help you keep more of your hard-earned money for the future.

 

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