Top 5 Tax Deductions You May Be Missing

Maximizing your tax deductions is key to keeping more money in your pocket. However, many taxpayers overlook valuable deductions, leading to overpayments. In this article, we’ll highlight five tax deductions that are often missed but could significantly reduce your tax liability. Make sure to review these carefully and consult a tax professional to determine if they apply to your situation.

1. State Sales Tax Deduction

If you live in a state with no income tax, this deduction can be especially valuable. The IRS allows you to deduct either state income taxes or state sales taxes paid during the year. This can be a significant deduction if you’ve made large purchases like a car, boat, or home improvement materials. Even in states with income tax, this option may benefit you, depending on your spending patterns.

Tip: Use the IRS’s optional sales tax deduction calculator to simplify claiming this deduction.

2. Home Office Deduction

With the rise of remote work and freelancing, the home office deduction has become increasingly relevant. If you use part of your home exclusively and regularly for business, you may qualify. This deduction applies to homeowners and renters alike and can include a portion of expenses like utilities, internet, rent, and mortgage interest.

Important: The space must be used solely for business purposes to qualify. Hybrid spaces (like working from your dining table) typically won’t meet the requirements.

3. Student Loan Interest Paid by Someone Else

If someone else (like a parent) pays your student loan interest, you might still qualify for this deduction. The IRS treats the payment as though it were made directly by you, allowing you to deduct up to $2,500 of student loan interest per year if your income is within the qualifying limits.

Key Point: Ensure you’re not being claimed as a dependent on another person’s tax return, as this would disqualify you.

4. Job-Related Moving Expenses for Active-Duty Military

While moving expenses are no longer deductible for most taxpayers, active-duty military personnel moving due to a military order can still claim this deduction. Qualifying expenses include transportation, lodging, and packing costs for the move.

Pro Tip: Keep all receipts and documentation to substantiate your claims, as this deduction can be scrutinized.

5. Charitable Contributions Without a Receipt

Many people know they can deduct large charitable donations, but small, unreimbursed expenses related to volunteering often go unnoticed. For example, if you drove your car for a charity, you can deduct 14 cents per mile. Supplies purchased for charitable activities may also qualify.

Reminder: Even for small amounts, document your expenses and keep records to support your deduction