When it comes to taxes, many people focus on the most obvious deductions: mortgage interest, charitable donations, or retirement contributions. But beyond these common write-offs, there are a number of valuable deductions and credits that often go unnoticed. These can lead to significant savings, especially for professionals, business owners, and families.
At ACap Advisors & Accountants, we regularly review tax returns that leave money on the table simply because clients weren’t aware of all the options available. Below are several tax deductions and credits that are frequently overlooked, and worth a second look before you file.
1. Home Office Deduction for Self-Employed Individuals
If you’re self-employed and use part of your home exclusively and regularly for business, you may be able to deduct a portion of your rent, utilities, and other home-related expenses.
This deduction can be calculated using either the simplified method or actual expenses. However, it’s important to note that W-2 employees, even those working remotely, are no longer eligible for the home office deduction under current federal tax law.
2. Lifetime Learning Credit
If you or a dependent is pursuing continuing education, such as graduate school or professional certification, the Lifetime Learning Credit offers up to $2,000 annually per tax return.
Unlike the American Opportunity Credit (which is limited to undergraduate studies and four tax years), this credit can be used for an unlimited number of years and covers a broad range of education expenses.
3. Child and Dependent Care Credit
If you pay for childcare or dependent care so you can work or look for work, you may qualify for the Child and Dependent Care Credit. Eligible expenses include daycare, after-school programs, and even day camps.
Depending on your income and the number of children, this credit could cover up to 35% of qualifying expenses, up to a set limit. It’s a frequently missed opportunity, especially for working parents who rely on part-time or nontraditional care providers.
4. Retirement Plan Contributions for Self-Employed Individuals
If you’re self-employed or own a small business, you may be eligible to contribute to retirement plans beyond a Traditional IRA, such as a SEP IRA or Solo 401(k). These plans allow for significantly higher contribution limits up to $69,000 in 2024, depending on your income and age.
In many cases, contributions can be made up until the tax filing deadline and still count for the prior year, providing a valuable opportunity to lower your tax liability and save for the future.
5. Medical Expense Deduction
While often overlooked, unreimbursed medical expenses that exceed 7.5% of your adjusted gross income (AGI) may be deductible if you itemize. These can include doctor visits, surgeries, dental treatments, mental health services, and even travel and lodging related to medical care.
If you had a particularly high medical year due to planned procedures, fertility treatments, or long-term care, it’s worth gathering receipts and documentation to determine if you meet the threshold.
6. “Above-the-Line” Deductions
These deductions reduce your adjusted gross income and are available even if you take the standard deduction. Common examples include:
- Student loan interest (up to $2,500)
- Contributions to Health Savings Accounts (HSAs)
- Self-employment tax (50% deductible)
- Educator expenses (up to $300 for teachers)
Because these deductions lower your AGI, they can also improve your eligibility for other tax credits and deductions.
7. State-Specific Opportunities Like California’s AB150
If you’re a partner or shareholder in an S-corp or partnership in California, the state’s passthrough entity (PTE) tax election under AB150 could help reduce your federal tax bill. This strategy allows businesses to pay state tax at the entity level, which can then be deducted on the federal return, effectively bypassing the $10,000 cap on state and local tax (SALT) deductions.
This is just one example of a powerful, but underutilized, strategy that varies by state. Consulting with a tax advisor familiar with your local laws can uncover additional savings.
Final Thoughts: Tax Planning Is More Than Just Filing
Finding the right deductions and credits isn’t just about lowering this year’s tax bill, it’s about long-term planning. Many of these opportunities require proactive steps throughout the year, not just during tax season.
At ACap Advisors & Accountants, we specialize in year-round tax strategies tailored to professionals, entrepreneurs, and families. If you’re unsure whether you’re taking advantage of all your options, we’re here to help.
Schedule a consultation today and discover what you might be missing.
