8 Things That You Didn’t Know Were Tax Deductions
There are some tax deductions that taxpayers forget about because they tend to be uncommon. This is especially true for those deductions hidden in the itemized section since many taxpayers opt for standard deductions on their returns.
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Knowing about these deductions and claiming them could significantly reduce your taxable income. Before preparing your 2023 tax return, see if you qualify for one of the following tax deductions.
Home Mortgage Interest Tax Deduction
This deduction is available to homeowners paying interest on their mortgage every year, up to $750,000 in principal.
This is one you don’t want to miss because it offers opportunities to reduce your taxable income based on how much you’ve paid out in interest on your home loan.
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SALT Deduction
No, this deduction isn’t for the amount of sodium in your diet. SALT stands for “state and local taxes.”
It’s now limited to a total deduction of $10,000, or $5,000 if married filing separately, but it still allows you to deduct high property taxes and state income taxes.
Student Loan Interest Deduction
Student loan borrowers who paid interest on a qualified student loan in the 2023 tax year are in luck. According to the IRS, they may deduct up to $2,500 from their taxable income using the student loan interest deduction.
To qualify for this deduction, borrowers must have paid interest on an eligible student loan in tax year 2023 and are under legal obligation to pay this interest. Additional qualifications are outlined on the IRS website for further review.
Educator Expense Deduction
Eligible educators may deduct up to $300 of qualifying education expenses through the educator expense deduction. These may include classroom books, supplies, computer equipment and other supplementary classroom materials.
Eligible educators, according to the IRS, must be kindergarten through grade 12 teachers, instructors, counselors, principals or aides for at least 900 hours a school year for that tax year.
Gambling Loss Deduction
According to the IRS, gambling losses may be deducted, but only if you track your losses and winnings and itemize these deductions on Schedule A (Form 1040).
You cannot deduct losses that exceed the amount of your winnings. You must also report the full amount of your gambling winnings for the year.
Medical and Dental Expenses Deduction
Using Schedule A (Form 1040), you may deduct just the part of your medical and dental expenses that exceeds 7.5% of your adjusted gross income (AGI).
Unreimbursed Employee Expenses Deduction
If you contributed money to your employer and that contribution was unreimbursed, then you may be able to deduct the expenses through the unreimbursed employee expenses deduction.
However, only a select few categories of employment qualify for this deduction. These include Armed Forces reservists, qualified performing artists, employees with impairment-related work expenses and fee-basis state or local government officials.
Home Office Deduction
Those who use a specific part of their home exclusively and regularly to conduct business may qualify for the home office deduction. You’ll calculate the percentage of your home designated for business activities.
The home office deduction is available for homeowners and renters in all types of homes. Remote or hybrid employees who work from home don’t qualify.
Stacey Bumpus contributed to the reporting for this article.
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