28 Tax Deductions You Didn’t Know You Could Write Off
Summary: Tax day is coming up fast, and you want to to take advantages of as many tax deductions as you can. You know the typical write-offs, but we found 28 tax deductions you didn’t know you could write off.<br> <br> These are tax deductions that most people will be eligible for. If you have a business, you can check out the episode we did on <a href="https://www.listenmoneymatters.com/llc-vs-scorp/">LLCs and S Corps.</a><br> <br> <br> <br> Before We Dive In<br> <br> We are going to list a ton of ways to save money on your taxes but it’s important to understand just how much you can save. For every $1,000 you deduct, you save your tax rate. If you’re taxed at 15%, you save $150 for every $1,000 you deduct. If you’re taxed at 30%, you save $300 for every $1,000 you deduct. So this is not small change we’re talking about.<br> Andrew and Laura use deductions extensively and want all of us to do the same. But some of us will stand to benefit more than others. If your household makes less than $80,000, you will see a significant impact if you take advantage of the incentives we outline.<br> They’re Incentives<br> <br> None of us likes paying taxes, and everyone agrees that the tax code is too complicated. But as Tom Wheelwright explains in his book<a href="https://www.listenmoneymatters.com/go/tax-free-wealth/"> Tax-Free Wealth,</a> taxes are not meant as a show of our civic commitment but as a series of incentives set by the government to encourage citizens to do things that grow the economy.<br> And if you look at things that are deductions, buying a home, having a kid, and starting a business, you can see what the government wants us to do to bolster the economy.<br> Don’t Be Lazy<br> The lazy way of filing taxes is to use standard deductions. This is what 2/3 of filers do. For 2017, that amount is $6,350 for single filers and $12,700 for married couples who file jointly. You may be able to deduct more than those amounts by taking itemized deductions. All you need to do is figure out if by doing so, your deductions would be higher than $6,350 or $12,700.<br> A Good Problem To Have<br> Many tax deductions have a phase-out meaning if you make over $X they become less impactful, and when you make over $X they can’t be used any longer. An excellent example of a phase-out tax deduction is passive income generated by <a href="https://www.listenmoneymatters.com/go/roofstock/">rental properties.</a> They phase out to 50% less impactful for a married couple who make more than $100,000 and phase out entirely after earning $150,000.<br> Must Use Deductions<br> These are deductions everyone eligible must take advantage of.<br> 1. Standard Tax Deduction<br> If you did the math and didn’t have enough itemized deductions to get you above $6,350 for singles and $12,700 for marrieds, you can take the standard tax deduction. If you are filing as head of household, you can deduct $9,350.<br> 2. Reinvested Dividends<br> <br> Do you have a <a href="https://www.listenmoneymatters.com/go/betterment-review-link/">Betterment</a> account? Do you sometimes get a notice that they have reinvested dividends for you? Each of those reinvestments increases your tax basis in the fund. That lowers your amount of taxable capital gains when you eventually sell your shares.<br> <br> When you finally do sell, don’t neglect to include the reinvested dividends in your cost basis, which you subtract from the gains from the sale to determine your gain, you are overpaying your taxes.<br> <br> 3. Child Care Credit<br> <br> When you use childcare while at work (not for date night, sorry!) you can take a tax deduction between 20-35% of those costs. If your company allows you to use pre-tax money for child care costs, that may be a better option than taking the deduction though. Suppose you are eligible for a 20% credit but are taxed at 25%. In that case,
