The Most Overlooked Tax Deductions

Some people may feel a thrill of patriotic duty from filing and paying their taxes, but for most of us, the most satisfying part of the process is realizing that we don’t have to write a big check to the IRS—or that we may even be getting a refund. Part of achieving that goal is the strategic use of tax deductions.

Tax deductions are used to reduce the amount of taxable income you are considered to have, and, as a result, reduce the final amount of tax that you owe. If you have $100,000 of income, and $20,000 in deductions, you only have to pay tax on $80,000 of your income. Many deductions are “low-hanging fruit,” in that you may already be doing the things that qualify you for a tax deduction; you simply need to report them on your income tax return. Let’s talk about itemizing tax deductions, and how to take advantage of some of the most overlooked tax deductions.

Should You Itemize Your Tax Deductions?

There are two ways to deduct from your taxable income: take the standard deduction or itemize your deductions. Both have their advantages. Taking the standard deduction is easier. In 2024, a single person can take the standard deduction of $14,600, and a married couple filing jointly can claim a standard deduction of $29,200. With the standard deduction, there’s no need to save receipts to prove that you are entitled to the deduction amount.

However, if you have available income tax deductions that total more than the standard deduction, failing to itemize means that you are leaving money on the table. What’s more, the current amount of the standard deduction is scheduled to “sunset” to its 2017 amount (adjusted for inflation). After that drop in the amount of the standard deduction, it will be even more advantageous for many people to itemize. Learning about the most commonly overlooked tax deductions can help you get the greatest benefit from doing so.

The Most Commonly Overlooked Tax Deductions

Most people know that they can deduct the amount of their charitable donations and home mortgage interest, and those are significant donations for many people. But as long as you are itemizing, you may as well use every deduction to which you are entitled, including:

Student Loan Interest

This is a deduction you can claim even if you are not itemizing deductions on your tax return—in other words, you can take it in addition to the standard deduction. The person legally responsible for repaying a student loan can deduct up to $2,500 in interest paid on the loan (even someone else, like a parent, actually paid it).

There are restrictions; the deduction begins to phase out at a certain income level, and you can’t claim the deduction if you are married and filing separately from your spouse. And if someone else repaid part of your loan on your behalf you might have to declare those payments as income. But if you qualify for this deduction, it can take a little of the sting out of student loan repayments.

Casualty and Theft Loss During a Disaster

Hurricanes. Tornadoes. Floods. Earthquakes. Nobody wants to have to go through a natural disaster, but if you happen to have lived through a federally-declared disaster and suffered losses that are more than $100 each and total more than 10% of your adjusted gross income, you can deduct them on your taxes.

Gambling Losses

You win some, you lose some—if that sums up your gambling experience, you may be able to take a tax deduction. You can deduct gambling losses on your income taxes to the extent that you have declared gambling winnings on your return. That includes not only winnings and losses from a casino or racetrack, but from bingo, lottery, and raffle tickets.

Jury Duty Pay

Pay you receive for serving on a jury is taxable as income, as is the income your employer might pay you even though you are serving on a jury. Some employers who continue to pay their employees on jury duty require the employees to turn over their jury duty pay. If that has happened to you, know that while you can’t “double dip” and get paid both by the court and your employer, you can deduct the amount of the jury duty pay on your taxes.

Mileage

One of the most overlooked tax deductions is the one for vehicle mileage, though the rules have changed in recent years. Employees can no longer deduct expenses for unreimbursed mileage put on a personal vehicle for work purposes, though self-employed individuals can take a deduction of $0.65 per mile in 2024 when they use their vehicles for business.

However, there are other mileage expenses you may be able to deduct: mileage you rack up for charitable purposes ($0.14 per mile), medical purposes ($0.21 per mile) and moving ($0.21) per mile; however, the moving mileage deduction is only available for active-duty military personnel.

The Bottom Line

The best way to know what tax deductions you may be eligible for is to work with an experienced tax preparer. To take maximum advantage of the state and federal tax deductions available to you schedule an appointment today with the accounting and tax preparation professionals at Gudorf Tax Group.