7 Commonly Overlooked Tax Deductions/Subtractions
Some say 7 is a lucky number. Today, we talk about 7 deductions you may not have been familiar with! Here at Practical Accounting Solutions, our focus is to find practical solutions to save you time and money. If you think you qualify for any of these, let us know at your tax appointment and we would be happy to help!
#1: Charitable Mileage
We love that you give back to your community, and now the government can give back to you with every mile you drive for volunteer work. Take a look at your Schedule A. Depending on your situation, you might have different qualifications on how much you can deduct for charitable mileage. You will then subtract the charitable mileage per deduction as dictated in your Schedule A from 18 cents per mile. In other words:
18 cents per mile - Charitable Mileage per Deduction = your charitable mileage per deduction
However, if you have the actual expenses you used for this deduction, you can use the following equation instead:
Actual Expenses - 18 cents per mile= your charitable mileage per deduction
Practical Accounting Solutions can also quickly calculate this deduction for you! To keep track of this throughout the year, you can download apps like MileIQ that can track and categorize your drives.
#2: Child Care Expenses
This deduction is for parents who use childcare regularly for their children. According to Census.gov, 38.7% of all U.S. households with a child under age 13 and both adults working reported to paying childcare. Under Virginia tax law, you can only claim this deduction if you claim a child as a dependent on your federal return. To find where federal credit for child and dependent care is, look at Form 2441 or Schedule 2 of Form 1040A. However, be sure not to enter the federal credit amount. This is a common mistake many filers fall prey to. If you have questions about how to find this number, reach out to Practical Accounting Solutions!
#3: Deduction on Long-Term Health Care Premiums
You can claim this deduction as long as you did not claim it as a Schedule A deduction on your federal tax return. Also, be sure to note that premiums may not be used for Virginia Long-Term Care Insurance Credit. The Virginia tax website gives a good example of the Virginia Long-Term Care Insurance Credit scenario.
#4: Purchasing Energy Efficient Equipment
Did you know you can save the planet and get a tax deduction at the same time? Virginia offers an income tax deduction of 20% of sales tax paid on energy-efficient equipment. For single filers, you can claim up to $500 per year; for joint filers, you can deduct up to $1,000 per year.
#5: Deductions for Payments of Prepaid Funeral and Insurance Premiums
This deduction has a few checkboxes, but it can save you! To qualify, you must be:
Age 66 or Older
Earned Income of ≥ $20,000 for the taxable year
Earned ≤ $30,000 in federal adjusted gross income for the taxable year
Moreover, you cannot claim this deduction if you’ve been reimbursed any premiums, claimed deduction for federal tax purposes, claimed another Virginia tax deduction/subtraction, or claimed federal or Virginia income tax credit. While this limits your ability to deduct, it can save you money on funeral insurance policies as well as medical and dental insurance premiums.
#6: Deduction for Being Over 65 Years Old
Getting older is a major plus in terms of taxes. You and your spouse can claim up to $12,000 each! Here are the major factors:
Born On/Before January 1, 1939 - You can claim up to $12,000 per person
Born On/Between Jan 2, 1939 - Jan 1, 1954 - You could still get a deduction, but it will be based on your income. In this case, you will look at your AFAGI (adjusted federal adjusted gross income).
#7: Buying Your First House
It’s a great time to buy your first house! You will qualify for this deduction if you set up a home buyer savings account, mutual fund, certificate of deposit, brokerage account, a money market account, or some other types of accounts with a bank or other financial institution. The money in these accounts, however, can only go toward paying a down payment or closing costs to a single-family home.
You’ll also need a qualified beneficiary - this is someone who lives in Virginia and has never owned a single-family home before. You’ll claim this subtraction on Schedule ADJ if you’re a resident, Schedule 760PY-ADJ for part-time residents, and Schedule 763-ADJ for nonresidents). There are a few additional limitations, too. You can have no more than $50,000 of principal in this account, and furthermore no more than $150,000 of principal and interest. If you decide to use this subtraction, note that if you use this money for anything other than the down payment or closing costs, you will have to pay back previous subtractions previously claimed for this account regardless of when you originally withdrew the money.
There are many lesser-known opportunities taxpayers have to keep their hard-earned money in their pockets. Here at Practical Accounting Solutions, we strive to ensure you can keep as much of your money as possible. Stop by our office or give us a call today to book your tax appointment!
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Disclaimer: The views presented in this post are meant as educational resources and should not be taken as direct advice for your personal finances or small business. Should you have questions regarding a post relating to your specific finances, please contact us at firstname.lastname@example.org.