You may have seen or heard people you know talking about how the new tax law made their refunds smaller than expected last year or even increased the amount they owed to the IRS.
Several common deductions were eliminated by the Tax Cuts and Jobs Act of 2017 and other congressional actions, including moving expenses, non-reimbursed employee business expenses, theft losses, tax-preparation fees, and safe deposit boxes.
Though things have changed, here are a few deductions and credits you’ll want to remember to keep your tax bill as low as possible.
Reminder: If you have tax questions, talk to an accountant or an attorney.
1. Medical expenses
If you paid out of pocket for medical expenses, you might be able to deduct them on your taxes. What qualifies as a medical expense is broadly defined and includes the obvious doctor’s visits, tests, and prescription drugs, as well as health-insurance payments, dental and vision costs, medical devices, transportation to and from medical appointments, lodging if you need to travel for medical reasons, and accessibility-related home renovations. However, you can deduct those expenses only if they exceed 7.5% of your adjusted gross income.
2. Home-mortgage interest
If you own a home, you probably already know about this one — it’s one of the most significant tax deductions available to most families. You can deduct the interest you paid on a home mortgage valued up to $750,000 (up to $1 million if your mortgage was issued before December 15, 2017). If you have a home-equity loan, the interest on that may no longer be deductible.
3. State and local (SALT) taxes
This one got a lot of attention because it was one of the most significant changes to the tax code. If you pay state or local income taxes (you probably do), property taxes, or other taxes to a state or local government, you can deduct those from your federal tax return — up to $10,000, regardless of whether you’re single or married filing jointly. Separate married filers get $5,000 each. This deduction was previously uncapped, so the limit is a big hit to people who pay a lot of local taxes.
4. Charitable contributions
Donations to charitable organizations are still deductible. Make sure to keep evidence of your contributions — bank or credit-card records for all donations and an acknowledgment letter from the nonprofit if the donation was more than $250 will suffice. If you donate money to a college or university and receive sports tickets in exchange, you’ll need to exclude the value of those tickets from the deductible amount.
5. Losses from natural disasters
“Casualty losses” — damage or destruction of property because of a sudden event — are deductible if they occur in a federally designated disaster area. You can look up federal disasters on the Federal Emergency Management Agency website — there are more than you might think.
6. Gambling losses
If you’re a gambler, you can deduct money that you spent on gambling up to your total winnings for the year. So if you spent $5,000 at Las Vegas casinos and won a $1,000 jackpot, you could deduct only $1,000 of your gambling losses.
7. Childcare expenses
If you pay for childcare so that you or your spouse can work or attend school, you may be able to get a tax credit for some of the money you spend on childcare expenses. You can claim up to $3,000 in expenses per child, and the credit (the amount deducted from your tax bill) is worth 20 to 35% of your expenses depending on your income.
8. Expenses related to a small business, freelancing, or independent contract work
If you have a small business, or you work as an independent contractor in the “gig economy” (ride-share drivers, scooter chargers, food deliverers, personal shoppers, etc.), you’ll want to make sure you’re deducting all the expenses related to your business.
This includes mileage if you drive your own vehicle, commissions and fees paid for using apps to find work, equipment (including your phone and computer — you can deduct a percentage that corresponds to what percentage of the time it’s used for business purposes), relevant software or subscription services, and your health-insurance premiums.
If you have a home office or other part of your home that’s specifically dedicated to your business, you can deduct the percentage of your household expenses (rent, utilities, etc.) that apply to that space.
All these expenses are calculated separately from personal deductions on Schedule C, so you don’t have to rely on itemizing your taxes to take these deductions. And keep in mind that you’re paying both income tax and self-employment tax on your small-business income — so you’ve got an added incentive to make sure you’re taking all the deductions you’re entitled to.
9. New ‘qualified-business-income’ (QBI) deduction
If you have income from a small business, you may qualify for a new “qualified-business-income” (QBI) deduction of 20% of your business’ net income. This is calculated separately from both the personal deductions and your business expenses, and additional restrictions apply above certain income levels. Your tax software or tax preparer should calculate this automatically if it applies to you. And let’s face it: If your taxes are this complicated, it is probably worth paying someone to make sure they’re done correctly.
10. Higher-education expenses
Two tax credits apply to education expenses — depending on which one you qualify for, you can likely claim some of the cost of tuition and required fees and may also be able to deduct the cost of books and materials. Education credits can be complicated, so you’ll want to rely on your tax software or accountant to figure out which one is best for you.
If you have student loans — or made payments toward loans in someone else’s name, like a partner or child — you can deduct the interest you paid during 2018. If it’s someone else’s loan, make sure to ask them for Form 1098-E, which they received from their lender.
The tuition-and-fees deduction was extended for 2019. This deduction is capped at $4,000 for people with adjusted gross income up to $65,000 ($130,000 for married filers) and begins to phase out as your adjusted gross income exceeds $65,000 (or $130,000 for married filers).
These credits and deductions apply even if you take the standard deduction.
11. Rental expenses
If you rent out a room or apartment through a service like Airbnb or Vrbo, you need to report the income you receive from that rental — but you can also deduct any related expenses, including a proportional share of your mortgage or rent and utilities, cleaning costs, advertising, and decor or furnishings.
If you own the property, you can also take a depreciation deduction on the rental-use percentage of your home or apartment. Make sure to deduct any fees paid to the platform you rent through. If you rent property, you can deduct related expenses even if you take the standard deduction.