When you file your taxes, you may claim fewer deductions than you are entitled to. This can lead to you paying much more than you have to if you pay taxes every year or making your tax return much smaller if you typically receive money back. Who wants the government to get or keep more of their hard-earned money than they are entitled to? Here are two tax deductions that tax experts report are often skipped or under-utilized due to misunderstandings about how they work.
1. Medical Expenses
Like most people today, you likely have a health insurance policy that pays for a portion of your medical bills and for at least part of the cost of your medication prescriptions. When you see that you can deduct medical expenses on your income taxes, you may think that they can only be deducted by the uninsured, but that is not true.
While the portion of any medical expense that your insurance company pays for you is not tax-deductible, anything that you pay out-of-pocket is. That means you can deduct your co-pays, out-of-pocket costs for medications, and any payment to any medical provider that is not covered by your insurance company, such as fees for psychological counseling, eye exams, and dental visits.
Additionally, you can deduct the cost of your transportation to and from visits to health-care providers, whether it is the cost of the gasoline you use getting to and from the facilities or costly taxi-cab fees.
Also, don't forget that all medical devices not paid for completely by your insurance company can be listed as deductions, including eyeglasses, contact lenses, wheel chairs, and even dentures. If you visit medical providers often or have a large family, these expenses really add up, so don't forget them this year when filing your taxes.
2. Dependent Deductions
While you likely know that children can be claimed as dependents on your tax return, you may not realize that children are not the only people who qualify as dependents. Dependents don't even have to live with you to qualify. For example, if you are helping support a parent in your house or out, as long as you pay at least half of their living expenses, they are considered a dependent. The IRS has a handy guide for determining whether a person you help support, yet does not live in your home, can be claimed as a dependent. Many in-laws and "half-relatives," like a half-sister, are listed on the guide as eligible dependents.
If you determine that you have an eligible dependent, then the deduction does not end there. You may also be able to deduct many of the expenses of what you provide for the dependent on your taxes, including their medical expenses.
For more information, contact The Callen Accounting Group, PLLC or a similar firm.