Navigating the world of taxes can be overwhelming, especially when understanding all the deductions and credits available. While most people are familiar with standard deductions or credits, many lesser-known tax benefits could save you money. Understanding which tax deductions and credits apply to you can reduce your tax burden and help you keep more of your hard-earned income.
In this blog, Park City Wealth Advisors will review some tax deductions and credits you might not know about but could benefit you this upcoming tax season.
Tax Deductions and Credits for the Entrepreneurs
Home Office
As an entrepreneur, if you run your business from home, you may be eligible for the home office tax deduction. To qualify, your work area must be dedicated exclusively and regularly to business activities—whether for managing operations, meeting with clients, or handling paperwork.
Mileage Expenses
Tax deductions for mileage expenses allow entrepreneurs and businesses to reduce taxable income by deducting the costs of using a vehicle for business purposes. You may be eligible for this deduction if you are an entrepreneur who frequently travels for client meetings or business errands. The IRS offers a standard mileage rate, which you can multiply by the number of business miles driven to calculate the deduction. Alternatively, you can track actual vehicle expenses like gas, repairs, and insurance.
Health Insurance
Self-employed individuals may be eligible for a tax deduction on health insurance premiums paid for themselves, their spouse, and their dependents. As an "above-the-line" deduction, this deduction directly reduces taxable income, potentially decreasing overall tax liability. If you are not self-employed but itemize your deductions, the health insurance premiums paid after taxes may be tax deductible.
Tax Deductions and Credits for Families
Education Expenses
Families can take advantage of both tax deductions and credits to offset education expenses. A key deduction is the Student Loan Interest Deduction, allowing you to reduce your taxable income by up to $2,500 for interest paid on student loans. On the credit side, the American Opportunity Tax Credit (AOTC) provides up to $2,500 per eligible student for the first four years of college, while the Lifetime Learning Credit (LLC) offers up to $2,000 annually for tuition and related expenses, with no limit on the number of years it can be claimed.
Camp for Your Kids
You might qualify for the Child and Dependent Care Credit if your children are enrolled in camp, a before-and-after school program, or daycare while you work or seek employment. For the 2024 tax year, you can claim up to $3,000 for one child or $6,000 for two or more children.
Medical Expenses
You can deduct qualified medical expenses that exceed 7.5% of your adjusted gross income. Qualified medical expenses include a range of costs such as doctor visits, hospital stays, prescription medications, and certain long-term care expenses. Additionally, expenses for exercise equipment or the purchase and upkeep of a spa or swimming pool could be tax deductible. If your healthcare provider prescribes specific exercise or equipment that includes maintaining a spa or swimming pool, you may also qualify for a tax deduction on those expenses.
Other Dependent Credit
The Other Dependent Credit is a tax benefit designed for taxpayers who support dependents who do not qualify for the Child Tax Credit, such as older children, relatives, or non-relatives who live with you and are financially dependent. For the 2024 tax year, this credit is worth up to $500 per eligible dependent.
Other Tax Deductions and Credits
Charitable Contributions
Charitable contributions to qualified organizations are tax-deductible, regardless of the amount. Be sure to keep receipts for your donations and any related expenses, such as mileage, parking, and tolls, incurred while volunteering or participating in fundraising events.
State Income or Sales and Local Tax Deduction
The State Income or Sales and Local Tax Deduction allows taxpayers to deduct either state and local income taxes or state and local sales taxes from their federal taxable income. For the 2024 tax year, this deduction is limited to a combined total of $10,000 ($5,000 for married filing separately). Based on their individual financial situation, taxpayers can choose the deduction that provides the greater benefit, helping to lower their overall tax burden.
Miscellaneous itemized tax deductions
If you suffer losses not covered by insurance—such as those from fires, storms, shipwrecks, or theft—you may be eligible to claim them as a tax deduction. However, these losses must have resulted from a federally declared natural disaster, and you can only deduct the portion that exceeds 10% of your adjusted gross income.
Maximizing Tax Deductions and Credits with PCWA
Maximizing tax deductions and credits is essential for optimizing your financial strategy, and Park City Wealth Advisors is here to help you navigate this complex landscape.
Our experienced team works closely with you to identify eligible deductions and credits tailored to your unique situation, helping you take full advantage of available tax benefits. By leveraging our advice, you can minimize your tax liability, increase your savings, and enhance your overall financial well-being.
Partner with PCWA to make the most of your tax situation and achieve your financial goals.
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