Kids all across the country, including those in my neighborhood, spent Saturday hunting for brightly colored eggs. Or, if they're in the Washington, D.C. area, perhaps they're getting ready to participate in tomorrow's (Monday, April 2) 140th annual White House Easter Egg Roll, like the youngsters in the photo above did last year.
Their parents, however, are more likely this weekend to be hunting for tax breaks as the April 17 filing deadline nears.
Every tax season, lots of taxpayers overlook some deductions, credits or other tax moves that can reduce their eventual Internal Revenue Service bill. Here are some that might have been hidden, but which you now should put into your tax-saving basket.
But before you start checking out these eggs-cellent tax treats, a timing heads-up. The tax breaks listed below can be claimed on your 2017 tax return due in a couple of weeks. As for the 2018 tax year, some of them have changed or even been eliminated due to the Tax Cuts and Jobs Act (TCJA). In those cases, I'll add a note — designated italics and an egg because, well, Easter eggs! — pointing it out.
OK. Let's go hunting for often overlooked tax breaks!
1. Multiple properties, multiple deductible property taxes: While you can only deduct mortgage interest on your main and a second home, you can deduct the property taxes you pay on all the personal real estate you own. As long as you paid the property taxes, which were based on the assessed value of the homes, to a governmental taxing authority, claim 'em all.
While this itemized deduction is a good tax benefit for your 2017 tax return, the TCJA now limits the total of all state and local tax deductions you can claim on Schedule A to $10,000. If all your property taxes exceed that this year, you won't get their full deduction benefit.
2. Moving expense to take first job: Here’s an interesting tax twist. Job-hunting expenses incurred while looking for your first job are not deductible, but moving expenses to get to that first job are. Even better, you don't have to itemize to claim this. If your work-related relocation last year was more than 50 miles, you can deduct 17 cents per mile of the cost of getting yourself, your family and your household goods to the new area, plus parking fees and tolls for driving your own vehicle.
Claim this above-the-line tax deduction if you can on your 2017 tax return. Note, though, that the new tax law means, starting with the 2018 tax year, that the moving deduction is no longer allowed for anyone other than members of the military.
3. Sales taxes on major purchases: If you itemize, you can choose to deduct either state and local income taxes or state and local sales taxes (SALT). If you write off sales taxes, the IRS provides a table of your state's average deduction amount for this Schedule A claim. But don’t forget to add in the sales tax paid on major purchases, such as a new car or other motor vehicle, boat or even a plane.
Again, the sales taxes you pay are part of the TCJA 10-grand limit in 2018 through 2025 tax years. This claim might not be worthwhile on your 2018 or beyond taxes if you find you're already near the $10,000 cap.
4. Interest on your RV or boat: Interest paid your main home's mortgage is one cherished by homeowners (and the real estate industry). But homes come in many forms. As long as where you hang your hat has sleeping, cooking and toilet facilities, the IRS says it counts as far as the residential mortgage interest deduction. This means a recreational vehicle or some boats qualify. And the interest on your unconventional home counts even if you don't live in it year-round. Tax law allows you to deduct interest on mortgages for up to two dwellings, your primary residence and a second home. That includes second homes that hit the road or float.
The TCJA left the mortgage interest deduction in place. However, the new tax law did reduce, in most cases, the home loan limit for this itemized deduction. Now instead of allowable interest on a mortgage up to $1 million, the cap is $750,000 ($375,000 for married filing separate filers).
5. Mortgage points: With mortgage interest rates going up (thanks Federal Reserve!), some folks might find it worthwhile to pay points to get a lower loan rate. If you itemize, you can deduct the points, which for tax purposes are considered as prepaid interest, you paid to purchase or build your primary home. Generally, if you can deduct all the interest you paid on your mortgage, you can also deduct all of the points.
6. Added standard deductions for older, blind filers: If you claim the standard deduction, the amount is based on your filing status. Older and visually impaired taxpayers, however, can claim additional standard deduction amounts just by checking boxes on Form 1040 (and doing a bit of added math). For 2017 returns, you're allowed an additional deduction of $1,550 as a single or head of household filer or $1,250 for each jointly filing spouse who checks the box as being age 65 or older at the end of the tax year. You're also allowed an additional deduction of the same amounts for blindness, even if do have some vision. The Form 1040 instructions has details on the age and sight requirements, as well as the worksheet to figure your added amount.
The TCJA keeps this additional standard deduction amount for older and visually impaired filers in the tax code. For the 2018 tax year, it is $1,600 for singles and heads of households and $1,300 for each spouse in a married couple.
7. Earned Income Tax Credit: The Earned Income Tax Credit (EITC) could put thousands of dollars in your pocket, but the IRS says that every year millions of eligible taxpayers don't claim it. The reasons it's overlooked are varied. Make sure you know whether you're eligible and, if so, claim the EITC (yes, even if you're single and have no kids). Certain qualifying filers in 2017 could get a credit of up to $6,318. The one downside here is that under 2015's Protecting Americans from Tax Hikes (PATH) Act, returns where the EITC is claimed means the IRS must hold tax refunds until at least mid-February. Judging from my email and comments here on the ol' blog, actual delivery of refunds from returns where the EITC (and/or the additional child tax credit) are claimed are taking much longer to be processed and sent.
The EITC's general application is unaffected by the TCJA. However, the new tax law permanently changes the way inflation is calculated for annual inflation adjustment purposes by mandating use of the Chained Consumer Price Index (CPI). The Chained CPI means that EITC benefits will increase more slowly than they would have under prior tax law. For 2018, the maximum EITC amount was $6,444 under the old tax law, but was cut using the new inflation method to $6,431.
8. Retirement savings credit: If you are stashing cash for retirement, check out the Saver's Credit. As long as you don't make a lot of money but are contributing to an IRS-approved retirement plan, such as a traditional or Roth IRA or a workplace 401(k) plan, this credit could get you a $1,000 tax break.
There are no TCJA changes to this tax credit either, so if you contribute to an IRA or workplace retirement plan in 2018, check out your retirement Saver's Credit eligibility again in 2019 when you file your 2018 tax return.
9. Lifetime Learning Credit: Most focus on educational tax breaks is on those that help young people go to college. But if you've got your degree and are now on the job, Uncle Sam can help with your continuing education. Claim the Lifetime Learning Credit, which is worth up to $2,000 per tax return, if you take courses that help you improve your work skills.
At the risk of repeating myself (again), the Tax Cuts and Jobs Act doesn't change this educational tax credit. If you take a class this year, check out the Lifetime Learning Credit in 2019 when you file your 2018 taxes.
10. Medical mileage: With medical costs apparently increasing every year, these expenses are a prime itemized expense. However, you must accumulate medical and dental costs that are more than 10 percent of your adjusted gross income — yes, it was temporarily bumped up from 7.5 percent to 10 percent for all filers by the TCJA — before you can deduct them. Beyond the standard doctor and prescription co-pays, there are some often overlooked medical costs can help clear your AGI threshold hurdle. One that's easy to forget is mileage for medical treatments and picking up prescriptions, Jot these mile amounts down and then use the optional standard deduction amount, which is 17 cents per mile for 2017 taxes, to figure how much to claim.
The TCJA put the 10 percent threshold in place for the 2017 (retroactively) and 2018 tax years. Be sure to take a close look at your medical costs this year. The mileage rate to use to help you clear the 10 percent hurdle when you file your 2018 tax return next year is 18 cents per mile.
11. Costs of caring for others: Parents are well aware of the costs of child care. They also usually know they can claim a tax credit to cover some of those costs. But if you pay someone to care for another dependent while you go to work, those expenses count toward this tax break, too.
Stop me if you've heard this before, but don't stop reading. There are no TCJA changes here, so this year if you use an outside caregiver for someone, say an elderly parent who lives with you, so you can go to work, be sure to check this tax credit out in 2019 when you file your 2018 taxes.
12. Self-Employment tax breaks: After years of widespread job loss, many Americans have opted for self-employment. Being your own boss, however, does come at a price. Workers often must buy their own health insurance, as well as pay a sometimes hefty self-employment (SE) tax. Make sure to deduct those self-employed medical policy premiums as an above-the-line deduction. Don't forget to also claim half of your SE tax as an adjustment to income. And if you contributed to a self-employed retirement plan, that amount can be claimed in the final section of page 1 of your Form 1040, too. That retirement plan contribution also counts toward the Saver's Credit cited in Easter egg tax break #8.
The TCJA primarily concentrated on major corporation tax breaks, but it did make some changes, too, that will affect small businesses. These three self-employment tax breaks for entrepreneurs, however, are still in the Internal Revenue Code. Claiming them this and next year could help your bottom line, which definitely will contribute to making your business a bigger success.
I hope at least some of thees often overlooked tax breaks can help you cut your 2017 and, where still applicable, 2018 taxes.
And on this Easter Sunday, I hope your Easter basket is full of goodies and your heart and life are full of joy and blessings!