7 most overlooked tax deductions that could help save money
Most individuals file taxes depending on how much money they make during the fiscal year. However, since the process is long and complex, it sometimes results in costly errors. A common mistake is overlooking tax deductions or, more simply, the expenses people can subtract from their taxable income. Understanding which expenses one can claim as deductions helps save significant money. Here are the seven most overlooked tax deductions individuals should know.
Charitable contributions
One of the most overlooked tax deductions is the charitable contributions made throughout the year. It could include property, cash, or any other monetary donation to charity. Interestingly, even out-of-pocket expenses incurred for volunteer work qualify. If someone had to drive for volunteer work, they could deduct the expenses one of two ways: deducting the actual cost of gasoline or deducting $0.14 per mile. That’s why one should remember to check the receipts from charitable organizations and the mileage costs when doing taxes. That said, not all donations are considered tax-deductible. The charity must be an approved tax-exempt organization to deduct a contribution on tax returns.
Student loans interest
While one may not enjoy paying interest on a student loan, doing so may have some money-saving benefits. One can deduct up to $2,500 (or the actual amount, whichever is less) of the interest paid on student loans. Any qualified student loan interest will work, including that on the loans taken out for oneself, a spouse, or someone else who was a dependent at the time of borrowing. The individual can consider interest deduction on the loan even if they do not itemize deductions when filing. However, there are other terms and conditions associated with student loan interest deductions that one should read before making any additions to the income tax returns.
Retirement savings contribution
Contributions to traditional IRAs and 401(k)s are not taxed.