Top 5 overlooked tax deductions and credits
Doing your taxes with an online product is a great way to conveniently and accurately file your return. But if you’ve ever worried whether or not you’ve caught every deduction, we understand the doubt it may cause. Overlooked tax deductions and credits may mean paying a higher tax bill than is necessary.
Overlooked tax deductions and credits may cost you
We’ve tapped our tax experts to shed light on a few of the most overlooked deductions, credits, and other tax benefits and why they might be missed. Plus, learn how our on-demand Online Assist option gives you unlimited access to an expert when you file online so that you can be confident in preparing your return.
Property taxes – Taxpayers may miss deducting property taxes paid to a county or other local government during the year. This is a commonly missed deduction as there is no dedicated tax form required to be sent to the homeowner to remind them. It’s up to taxpayers who choose to itemize to remember to deduct the amount paid as an itemized deduction.
Dependent care credit – Often if a taxpayer has a childcare flexible spending account (FSA) using pre-tax dollars, and two or more children, they may also be able to take advantage of the dependent care credit. For example, a taxpayer with two children can exclude $5,000 and potentially claim a credit based on $1,000 of additional qualifying childcare expenses. But a taxpayer with one child who excludes $5,000 cannot claim a credit for any additional childcare expenses.
Reinvested dividends – Taxpayers who own dividend paying accounts may have them automatically reinvested into their account to buy more shares. They pay taxes on the cash dividends for the year they are distributed and reinvested but may inadvertently pay taxes again on the same dollars when the shares are sold in the future. Taxpayers should keep careful records and an eye on their cost basis to avoid paying taxes twice.
Earned income tax credit (EITC) – This credit is intended to reduce the amount of tax owed for low- and moderate-income wage earners. It is a refundable credit meaning the IRS will pay the credit even if it is more than the tax owed. For 2020 the credit is as high as $6,660 depending on filing status and family size. However, only 4 out of 5 eligible taxpayers claims the credit according to the IRS. That may be due to complex rules and limited understanding of who is eligible.
Deductible IRA contributions – Taxpayers who contribute to a Traditional IRA may be eligible to claim some or all of their contributions as a deduction. With contribution limits up to $6,000 (or $7,000 if the account owner is age 50 or older), overlooking this tax deduction could mean missing out on a sizeable reduction to their taxable income.
Finding overlooked tax deductions and other tax benefits
The items listed above represent just a few examples of commonly missed deductions, credits, and other tax benefits taxpayers overlook when they are not familiar with the ins and outs of taxes. The good news is that H&R Block Online is designed to help you identify these and other overlooked deductions that may be available to you.
Plus, if you have questions along the way, you can get on-demand help from an experienced tax pro with Online Assist. Our tax pros speak the tricky language of taxes and are dedicated to getting you your maximum refund.Disclaimer number84. Scroll to bottom of page.
Having one of our experienced tax pros comprehensively review your completed tax return can give you the confidence of knowing you’ll get the most money back.
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