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
Why Half of Retirees Now Owe Taxes on Social Security
Why Half of Retirees Now Owe Taxes on Social Security

Growing numbers of seniors are paying taxes on their Social Security benefits, but you might be able to avoid this fate.

7 Tricks to Cleaning Your Bathroom Faster
7 Tricks to Cleaning Your Bathroom Faster

These tips can get your bathroom sparkling with little time and no elbow grease.

9 Foods You Should Never Buy Again
9 Foods You Should Never Buy Again

Make the wrong food choices, and you can ruin your health — and possibly shorten your life.

12 Things Everyone Should Stop Buying This Year
12 Things Everyone Should Stop Buying This Year

These convenient household products come with hidden costs that you might not have considered.

11 Home Upgrades With the Best Payback in 2020
11 Home Upgrades With the Best Payback in 2020

The home remodeling projects that deliver the best bang for the buck tend to have one thing in common.

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.

8 Tips for Retiring Comfortably on Social Security Alone
8 Tips for Retiring Comfortably on Social Security Alone

It’s never too early to start learning how to live well while living on less.

Am I Eligible for My Mother’s Social Security Benefit?
Am I Eligible for My Mother’s Social Security Benefit?

Can an adult daughter tap into her late mother’s benefit?

11 Generic Products You Should Buy at Costco
11 Generic Products You Should Buy at Costco

Not all generics are worthwhile, but these are among the best from Costco’s Kirkland Signature brand.

9 Things You’ll Never See at Costco Again
9 Things You’ll Never See at Costco Again

The warehouse store offers an enormous selection, but these products aren’t coming back.

This Surprise Factor Can Raise Your Risk of Dementia
This Surprise Factor Can Raise Your Risk of Dementia

Nearly half of U.S. residents may face this threat.

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.

Organize Your Home With These 10 Thrift Store Finds
Organize Your Home With These 10 Thrift Store Finds

Resolve to be clutter-free in 2021 with these secondhand purchases.

This Gas Station Scam Is Victimizing More Drivers
This Gas Station Scam Is Victimizing More Drivers

For the second straight year, a growing number of Americans believe they’ve fallen prey to this scam.

11 Laws You Could Be Breaking Without Knowing It
11 Laws You Could Be Breaking Without Knowing It

Seriously? Fibbing about the weather is a crime? This and other little-known legal traps await the unwary.

6 Legal Documents Retirees Need — but Don’t Have
6 Legal Documents Retirees Need — but Don’t Have

Few retirees have all of these documents that are crucial to their golden years — especially during a pandemic.

These Are the 3 Best Used Cars You Can Buy
These Are the 3 Best Used Cars You Can Buy

These vehicles boast reliability, safety and long-lasting value.

13 Things Seniors Can Get for Free — or Almost Free
13 Things Seniors Can Get for Free — or Almost Free

There are many ways to get cheap or free services and goods after reaching a certain age.

15 Amazon Purchases That We Are Loving Right Now
15 Amazon Purchases That We Are Loving Right Now

These practical products make everyday life a little easier.

Internet Providers Can’t Charge You for This Anymore
Internet Providers Can’t Charge You for This Anymore

Starting this month, your ISP no longer can bill you for this fee.

Can a Divorced Widow Claim Her First Husband’s Social Security Benefits?
Can a Divorced Widow Claim Her First Husband’s Social Security Benefits?

The rules are complicated when it comes to eligibility for survivors benefits.

9 Small Expenses That Are Bleeding Your Budget Dry
9 Small Expenses That Are Bleeding Your Budget Dry

Keep more of future paychecks by eliminating these budget-busting unnecessary expenses.

15 Painless Ways You Can Cut Costs in 2021
15 Painless Ways You Can Cut Costs in 2021

Follow these tips to save, so you’ll have money for things that really matter.

11 Huge Retirement Costs That Are Often Overlooked
11 Huge Retirement Costs That Are Often Overlooked

Does your retirement budget account for all of these costs?

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.