Savings Beyond the Ordinary: Unveiling Hidden Tax Credits at Year-End
- Reviewed by: Brian Stormont, CFP®
- November 13, 2023
When it comes to saving money, most people think of budgeting, cutting expenses, and finding ways to increase their income. However, there’s another avenue that often goes overlooked: hidden tax credits. These are special deductions provided by the government that can significantly reduce your tax liability. In this article, we’ll delve into some frequently overlooked tax credits that could save you a substantial amount of money.
Tax Deductions for Homeowners
Owning a home comes with a range of potential tax deductions that can put money back in your pocket. Here are some of the key deductions to consider:
- Property Taxes
Property taxes are a significant expense for homeowners, but they can also be a valuable deduction come tax season. You may be eligible to deduct the full amount of property taxes paid on your primary residence.
- Home Office Deduction
If you use a portion of your home exclusively for business purposes, you may be able to claim a home office deduction. This deduction can include expenses such as a portion of your rent or mortgage, utilities, and maintenance costs and can lower your taxable income, leading to a smaller tax bill.
- Mortgage Interest
One of the most well-known deductions for homeowners is the mortgage interest paid on your primary residence. This can lead to substantial savings, especially in the early years of your mortgage when interest payments are higher.
Tax Deductions for Medical/Health Concerns
Health-related expenses can be a significant financial burden, but there are several tax deductions available to help ease the financial strain:
- Medical Expenses
Certain unreimbursed medical expenses, such as doctor’s fees, prescription medications, and qualified long-term care services, can be deducted if they exceed a certain percentage of your adjusted gross income.
- Long-Term Care Premiums
If you pay long-term care insurance premiums, you may be eligible for a tax deduction. This can be especially beneficial for individuals planning for their future healthcare needs.
Tax Deductions Related to Education
Investing in education is a powerful way to enhance your skills and career prospects. The government provides several tax deductions to help offset the costs:
- Lifetime Learning Credit
This credit allows you to claim a percentage of qualified education expenses for yourself, your spouse, or your dependents. It’s particularly valuable for lifelong learners pursuing further education.
- American Opportunity Credit
Designed for students in their first four years of higher education, this credit covers a portion of qualified education expenses, including tuition, fees, and course materials.
- Student Loan Interest Paid
If you’re repaying student loans, you may be able to deduct the interest paid, helping to reduce the overall cost of your education.
Other Unique & Unusual Tax Deductions
In addition to the more common deductions, there are some unique and unusual deductions that can provide unexpected savings:
- Gambling Losses
Believe it or not, if you’ve experienced losses from gambling, you may be able to deduct them on your tax return, as long as they don’t exceed your winnings.
- Charitable Acts
Donations to charitable organizations can be deducted, but many people are unaware of the wide range of expenses that qualify, including mileage for volunteer work and certain out-of-pocket expenses.
Unearthing hidden tax credits can be a game-changer for your financial well-being. Understanding how deductions and credits work within the context of the tax year is crucial for maximizing your savings. By utilizing these tax deductions and credits, you can significantly reduce your income tax burden. If you’re unsure about which deductions apply to your situation, seeking the guidance of a financial advisor can make all the difference. At Insight, we’re dedicated to helping you maximize your tax savings and achieve your financial goals. Whether you’re looking for a Houston financial advisor or a San Ramon Financial Advisor, our team of financial advisors is here to help. Contact us today to explore the untapped potential of hidden tax credits.
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Reviewed by,
Brian Stormont, CFP®
Brian Stormont is a comprehensive, fee-only financial advisor with Insight Wealth Strategies who began his career in the financial industry in 2000. His expertise encompasses retirement planning, investment planning, estate planning, and high-level strategies to help business owners and individuals minimize their income taxes.
Insight Wealth Strategies, LLC is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Insight Wealth Strategies, LLC and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Insight Wealth Strategies, LLC unless a client service agreement is in place.
Insight Wealth Strategies, LLC (IWS) and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.
