Did You Miss These 7 Tax Credits and Deductions?

Americans love tax breaks.

In the past, everybody knew they could deduct mortgage interest, medical expenses over a certain amount, gifts to charity — even the cost of preparing their tax return.

However, recent tax reform means some deductions have now disappeared. Others aren’t as valuable, thanks to an increased standard deduction that makes it less attractive to itemize deductions.

Nonetheless, here are some credits and deductions you should not overlook. Some save you money if you itemize, but others are available even if you do not.

1. Charity

If you itemize, you can deduct the value of any cash or property donations to a legitimate charity, although you’ll need receipts.

That’s common knowledge, but here’s something that isn’t: Volunteers can deduct 14 cents per mile traveled to and from charity work, plus out-of-pocket expenses from that work, including supplies and required uniforms. (Your time isn’t deductible.)

For more details, check out IRS Publication 526.

2. State taxes

This tax break is not as generous as it once was. In the wake of 2017’s Tax Cuts and Jobs Act, taxpayers who itemize can deduct state individual income, sales and property taxes up to a limit of $5,000 or $10,000, depending on their tax filing status.

So, while this tax break has been trimmed back under tax reform, it’s still valuable to many — especially residents of the seven states with no state income tax, which are:

  • Alaska
  • Florida
  • Nevada
  • South Dakota
  • Texas
  • Washington
  • Wyoming

3. Child tax credit

As we reported last year, not only did the child tax credit survive tax reform, it also became more generous. As we explain in “The 7 Most Valuable Deductions and Goodies That Survived Tax Reform“:

“The new rules double the credit to $2,000 per child. However, the refundable part of the credit cannot exceed $1,400. The tax overhaul also makes this credit available to more families.”

Remember, a credit is worth a lot more than a deduction: A credit reduces your taxes dollar for dollar, whereas a deduction only reduces the income you’re taxed on.

For example, if you’re in the 25 percent tax bracket, a dollar of deduction reduces your tax by 25 cents. But a dollar of credit reduces your taxes by a full dollar.

4. Retirement

Retirement plan contributions often qualify for a deduction, but they also can net you a credit if your income is relatively modest.

It’s called the Retirement Savings Contribution Credit or Saver’s Credit, and you may be eligible for it if you made contributions to an IRA, 401(k) or other qualified retirement plan.

We recently reported in “Most Workers Don’t Know This Retirement Tax Credit Exists“:

“If you’re eligible for it, the credit is worth as much as 10 to 50 percent of your retirement plan contributions, according to the IRS. The maximum dollar amount of the credit is $2,000 — or $4,000 for married people filing joint tax returns.”

To be eligible for the Saver’s Credit for tax year 2018, you must have had an adjusted gross income of no more than:

  • $63,000 for married people filing jointly
  • $47,250 for people filing as heads of household
  • $31,500 for all other taxpayers

5. School

Knowledge is power and lower taxes.

The American Opportunity Tax Credit is a great way to lower your taxes if you are attending school. You can claim the credit for eligible education expenses during your first four years of higher education. According to the IRS:

“The amount of the credit is 100 percent of the first $2,000 of qualified education expenses you paid for each eligible student and 25 percent of the next $2,000 of qualified education expenses you paid for that student.”

This credit is especially valuable because it’s partially refundable, meaning you can theoretically get more money back than you paid in. If the credit brings your tax down to zero, 40 percent of the remaining amount of the credit — up to $1,000 — is refunded to you.

6. Medical expenses

Because of income limitations, medical expenses are tough to deduct. But do the math if you had big bills last year. This is another deduction that tax reform made more valuable — temporarily.

For both the 2017 and 2018 tax years, you can deduct medical expenses that exceeded 7.5 percent of your adjusted gross income. Before that, you could not deduct expenses until they exceeded 10 percent of income.

However, Uncle Sam’s newfound generosity has limits — under tax reform, the threshold will jump back up to 10 percent when you file your taxes next year.

7. Health savings account

Tax reform’s changes to the tax code did not eliminate or curb the deduction for health savings accounts, which allow you to deposit a certain amount of pretax earnings each year that you can use to reimburse yourself for eligible health care expenses.

Individuals with an eligible high-deductible health insurance plan can deduct $3,450 from their 2018 tax return. That amount jumps to $6,900 for families.

Know something we missed? Your fellow readers would love to hear about it. Post a comment below or on our Facebook page.

Chris Kissell contributed to this report.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
16 Affordable Products That Could Save Your Life
16 Affordable Products That Could Save Your Life

You’ll want to order these sometimes surprising products from Amazon ASAP.

6 Ways to Guarantee Yourself a Steady Retirement Income
6 Ways to Guarantee Yourself a Steady Retirement Income

Saving is just one part of the retirement equation. Do this now to guarantee income in your golden years.

11 Small Money Moves That Will Make a Big Difference
11 Small Money Moves That Will Make a Big Difference

These small money moves will pay off big in the long run.

Don’t Pay for These 10 Things: They Are Free With a Library Card
Don’t Pay for These 10 Things: They Are Free With a Library Card

Before you spend another dollar on items and services like these, check with your public library.

7 Bank Accounts With Extra Perks for Seniors
7 Bank Accounts With Extra Perks for Seniors

These accounts offer exclusive discounts and other perks — including interest — to older customers.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

How to Buy Gas At Costco Without a Membership
How to Buy Gas At Costco Without a Membership

The warehouse club often has some of the cheapest gas in town. Here’s how you can get it as a nonmember.

10 Things to Stop Buying If You Want a Clutter-Free Home
10 Things to Stop Buying If You Want a Clutter-Free Home

If you like to keep things simple, avoid these purchases.

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

Vacuums from this brand can last a half-century, if not longer — and they’re hot on the resale market.

A Simple Way to Silence Robocalls Today
A Simple Way to Silence Robocalls Today

A few steps can keep your phone from ringing when a spammer calls.

This Company Makes the Best Tires in America
This Company Makes the Best Tires in America

Driver satisfaction with tires is at an all-time high, but one brand stands out.

This Health Issue Can Hint at Dementia Years in Advance
This Health Issue Can Hint at Dementia Years in Advance

One type of pain is especially associated with cognitive decline.

Can I Switch to Spousal Social Security Benefits When My Ex Dies?
Can I Switch to Spousal Social Security Benefits When My Ex Dies?

Knowing when to claim can help you maximize benefits.

Medicare Will Not Cover These 6 Medical Costs
Medicare Will Not Cover These 6 Medical Costs

Don’t let these health care expenses catch you off guard in retirement.

8 Things You Should Always Buy on Amazon
8 Things You Should Always Buy on Amazon

The giant retailer shines when it comes to these things, from basics to hard-to-find specialty goods.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

12 Deep Discounts Available on Amazon This Friday
12 Deep Discounts Available on Amazon This Friday

These items are steeply discounted — but the deals won’t last long.

5 Ways to Fill Your Pantry With Free Food
5 Ways to Fill Your Pantry With Free Food

Anyone can take advantage of these resources.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

6 Reasons You Should Stop Hiding Cash at Home
6 Reasons You Should Stop Hiding Cash at Home

Stashing money around the house is anything but harmless.

5 States With the Worst Health Care for Retirees
5 States With the Worst Health Care for Retirees

All of these states are located in the same region of the nation.

36 Things That Will Be Obsolete Soon
36 Things That Will Be Obsolete Soon

The writing is on the wall for dozens of things we have grown up with.

5 Products You Should Never Buy Generic
5 Products You Should Never Buy Generic

Sometimes the brand-name version is clearly superior.

This Cellphone Carrier Has the Worst Network Quality, Customers Say
This Cellphone Carrier Has the Worst Network Quality, Customers Say

One major wireless provider stands out for the least reliable call, messaging and data services.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.