The April 15 income tax deadline is right around the corner, and U.S. taxpayers should use that time to dig up money-saving tax breaks.
More formally known by the Internal Revenue Service as tax expenditures, the U.S. tax code holds hundreds of tax breaks, including specific deductions, credits, exclusions, and exemptions.
“There are what many consider hidden tax strategies and tax breaks, but many of them are playing out there in the open,” Joel Sales, tax expert at JustAnswer, told NTD. “The IRS has code and tax law that have precedent for the use of the everyday American. Some tax breaks are hidden in fine print that sometimes do get neglected, not because they're a secret, but more so because the hidden part is usually not the law; it's the paperwork.”
The Self-Employment Health Insurance Deduction
This tax break is much broader than people realize. “Eligible self-employed filers can deduct health insurance, dental, vision, and qualified long-term care premiums,” Sales said. “The IRS says that coverage can include any child under the age of 27, even if they're not a dependent. Many of these breakouts of this insurance deduction are not truly well known.”Bond Market Breaks
Many taxpayers with investment income don't realize they may be able to exclude part of it from state-level taxation.“Investments, such as Treasury bonds, that invest in securities of the US government can subtract this income from their state return,” Logan Foltz, founder and principal at TaxSmart MD, told NTD.
Trump Account Tax Breaks
One of the newer tax breaks comes from the recently enacted Trump accounts.Retirement Tax Deductions
Many taxpayers may not realize they can contribute to an IRA, Roth IRA, or Health Savings Account as late as April 15 for the prior tax year. “This is one of the few ways that they can take action to lower their tax liability after the end of the calendar tax year,” Foltz noted.Small Business Tax Deductions
The Pass-Through Entity Tax is a special tax break available to business owners that they often miss. “The reason I like it so much is that it enables high-income taxpayers to deduct State and Local Taxes (SALT), which they otherwise wouldn't be able to deduct on their individual returns,” Foltz said. “It also lowers Adjusted Gross Income, which may open the door for more 'above the line' deductions and credits.”Don’t Make These Tax Filing Mistakes
Unforced errors can further dilute tax savings if you’re not careful.One of the biggest tax errors is assuming that tax planning ends on Dec. 31. “While the majority of strategies, examples of tax credits and deductions, are capped at the end of the tax year, several areas, like retirement, IRA contributions, HSA contributions, and matters for self-employed taxpayers, till have a window that hasn't necessarily closed,” Sales said.
Another mistake people make is trusting the tax packet more than supporting paperwork. “For example, Form 1098 for mortgage interest may not show every deductible point, while marketplace insurance from your 1095-A form may not be fully accurate,” Sales said. “Here, you may be paying more taxes than necessary.”
Taxpayers who assume that software will find a tax break are playing with fire, too. “Software can calculate what you enter, but it can’t infer seller-paid points or a missing marketplace reconciliation form,” Sales said. “That's really what an accountant does, so consult a tax professional you trust.”