Welcome to “5 Tax Deductions to Look Out for in 2023”
Don’t pay too much in taxes by skipping these tax deductions. Check out the top five tax deductions that people typically forget to claim so that you may save more money. Keep reading to know which tax deductions in 2023 you should track!
Earned Income Tax Credit
Every year, millions of people with lower incomes use this credit as a major tax deduction. The IRS estimates that 25% of taxpayers who are entitled to the Earned Income Tax Credit do not apply for it. Due of the complexity of the criteria, some persons do not receive the credit. Others just don’t realize they meet the requirements.
The EITC is not a deduction but a refundable tax credit. The credit is intended to increase low- to moderate-income workers’ take-home pay. But only those with lower incomes are eligible for the credit.
Many white-collar employees among the tens of millions of people and families previously categorized as “middle class” are now categorized as “low income”. This happens as a result of either job loss, wage reduction, or reduced hours worked during the year.
Depending on your income, marital status, and family size, you may receive a specific refund. Even if you don’t owe any taxes, you must submit a tax return in order to get a refund from the EITC.
Additionally, you can file at any time throughout the year to request an EITC refund for up to three prior tax years if you were previously entitled to claim the credit but did not.
Moving Expenses
One significant subset of taxpayers can still claim their relocation expenses to the IRS even if the majority of taxpayers lost the option to do so starting in 2018. This being the military personnel. If you are an active duty military member moving, you may still write off these costs as long as you don’t get the government to pay for your move.
Additionally, eligible moving expense reimbursements are tax-free as long as the relocation was mandated by the military and the move is permanent.
Therefore, start gathering your receipts right now so you may start deducting the price of your family’s trip and accommodation, packing and shipping home items, shipping autos, and shipping your cherished pets!
And that’s fantastic news for the men and women who heroically served our nation, for whom we are grateful.
State Sales Tax Deductions in 2023
Those who reside in states without an income tax will benefit the most from this write-off, such as the people living in some of these states: Florida, Nevada, Tennessee, Texas, Washington, etc. State and local sales taxes or state and local income taxes must be subtracted. The state and local income tax deduction is often a better bargain for the majority of residents of states that levy income taxes.
You have two ways to deduct sales tax on your tax return if you live in a state without income taxes. One way to figure out what you may write off is to utilize the IRS tables given for your state.
Additionally, if you bought a car, boat, plane, house, or made significant home improvements, you might be allowed to add the state sales tax you paid on these expensive purchases to the amount stated in the IRS tables up to the state’s maximum allowance. In addition, you may utilize a record of all the sales tax you paid throughout the course of the year.
Reinvested Dividends
Even while this isn’t a true tax deduction, it can nevertheless help you save a lot of money. And a lot of taxpayers overlook it. Remember that each reinvestment raises your “tax basis” in the stock or mutual fund if, like the majority of investors, you have your mutual fund and stock dividends regularly reinvested in more shares.
As a result, when you sell your shares, the amount of taxable capital gain is decreased (or the amount of tax-saving loss is increased). Overpaying taxes results from failing to incorporate the reinvested dividends in your cost basis, which you deduct from the selling profits to calculate your gain.
Student Loan Interest
In the past, no one received a tax advantage if parents or another party repaid student loans taken out by a student. According to the legislation, you had to be responsible for the debt and make the payment personally in order to qualify for a deduction. However, there is a new exception.
Even if someone else repays the loan for you, the IRS will still treat it as though they handed you the money and you subsequently paid the bill yourself, despite the fact that you may be aware of this possibility. Therefore, a student who is not listed as a dependent may be eligible to deduct up to $2,500 in interest on student loans that you or another person paid.
Additional Tax Deductions in 2023 To Track:
Jury Pay
While an employee is serving their community, some businesses continue to pay them their full salary but request that they return their jury costs to the business. The only issue is that such fees must be reported as taxable income. To avoid paying taxes on money that just goes through your hands, you can deduct the amount if you transfer it to your employer.
Business Travel and Meals
Travel and food costs can be deducted from self-employment tax obligations, whether they relate to a cross-country trip or an overnight stay on the opposite side of the state. As long as they are used for genuine, authorized business objectives, travel-related costs including flights, lodging, and meals are tax deductible.
Travel costs for your spouse, children, or other persons cannot be written off unless they are your employees. You can write off 100% of the price of any meal or drinks a restaurant provides in 2022.
You can utilize a regular daily meal allowance rather than subtracting the exact cost of each meal, which can need a lot of receipt hoarding. Instead of documenting each and every meal cost, this technique allows you to deduct a fixed amount (though you should still save your receipts in case an audit is conducted). The meal allowance rate is established by the U.S. General Services Administration.
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Also read: How to Prepare for an IRS Audit
