We’ll admit it: There’s little that’s enjoyable about filing taxes — that is, except for the possibility of getting a refund check.
That’s why it’s worth putting in a little elbow grease to figure out how to take advantage of as many tax breaks as possible. But unless you work for the IRS or consider the tax code a good beach read, that can seem like a daunting proposition. To save you the research, we’ve pulled together a list of commonly overlooked tax deductions and credits you could be eligible for.
Relocate for that sweet new gig this past year? Any job-related moving expenses not reimbursed by your new employer could be tax-deductible.
You have to meet two criteria, however. The first is a distance test: Your new office must be at least 50 miles farther from your old home than your old job was from your old home. In other words, if you would have had to commute an extra 50 miles to your new job by staying in your old house, you’d meet the distance test.
There’s also a time test. If you’re an employee, you have to work full-time for at least 39 weeks in the first 12 months after you move. If you’re self-employed, you have to meet the same 39-week rule in the first year — and have a total of 78 full-time weeks in the first two years.
Feel like you spend most of your life on the road? You may be able to get a deduction on some of those miles.
If you traveled a lot because of certain qualified medical visits (seeing specialists or getting treated for diseases, for example) you may be able to deduct actual expenses like what you spent on gas or tolls, or use the 2017 standard medical mileage rate of 17 cents per mile.
If you had to travel for business purposes outside of your regular commute, like visiting clients or attending meetings across town, transportation costs not reimbursed by your employer may be deducted as a business expense, at 53.5 cents per mile for 2017.
If you did volunteer work with a charitable organization that required you to drive, you may be able to take a deduction of 14 cents per mile for 2017.
Starting in 2013, the IRS gave self-employed taxpayers a break by simplifying the home-office deduction calculation: Multiply the square footage of your dedicated office space by $5, up to 300 square feet. Of course, you can still choose to itemize using the original method — by pro-rating the share of the total deductions you’d take on your whole home — but the newer method helps cut down on paperwork. In either case, your home office must be your principal place of business and used exclusively for work.
If you have a student in the family — or even if the student is you — there are a few credits and deductions you could be eligible for.
The American Opportunity Education Tax Credit (AOTC): This gives up to $2,500 per student to help cover tuition, fees, books and other educational expenses for each of the first four years of post-secondary education. Individuals with a modified adjusted gross income (MAGI) of $80,000 or less, and couples with a MAGI of $160,000 or less, are eligible to take the full credit.
The Lifetime Learning Credit (LLC): The LLC offers up to $2,000 per tax return to help cover tuition for both degree programs or for professional training. The credit is limited to one per household, and if you’re eligible for both the AOTC and the LLC in the same year, you can take either credit but not both. To claim the full credit, your MAGI must be $65,000 or less for individual filers; the number’s $131,000 or less for married filing jointly.
Tuition and Fees Tax Deduction: This deduction, which cannot be used if you are already taking the AOTC or LLC, allows you to deduct up to $4,000 from your taxable income for qualified higher-education expenses. The deduction begins to phase out for individuals earning more than $80,000 or joint filers earning more than $160,000.
KIDS’ CAMP COSTS
You’re likely already familiar with the child and dependent care credit, which helps offset some of the cost of child care for working parents. You may not realize, however, that the cost of summer day camps or sports camps may count in that category, too, as long as you used the camps to provide care while you and your spouse were at work. The credit is a percentage, as determined by your adjusted gross income, of your child care expenses, up to $3,000 for one child under age 13 and $6,000 for two or more.
KIDS’ SALARIES FOR WORKING FOR YOU
If you’re a business owner and your children are on your payroll, you may be able to deduct their income as a business expense from your business income if they performed duties as an employee. Even better: You won’t have to pay Social Security or Medicare taxes for a child under 18, if your business is a sole proprietorship or a partnership between parents.
Did you have to pay a big repair bill on your home after a storm blew into town, or did your car get damaged during an earthquake? Then you may be able to deduct a portion of your costs that wasn’t covered by insurance as a casualty loss.
You may already be aware that you get a tax break on your mortgage interest. But you may also be able to deduct your mortgage points, which are the loan origination fees or prepaid interest you paid in order to obtain a mortgage on your primary residence. Typically, you can deduct them in the year that you paid the points if you meet certain qualifying conditions.
There’s little that’s enjoyable about filing taxes — that is, except for the possibility of getting a refund check.
This publication is not intended as tax advice. Northwestern Mutual and/or Financial Representatives or Northwestern Mutual do not give legal or tax advice. Taxpayers should seek advice based on their particular circumstances from an independent tax advisor.