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List of 14 Commonly Overlooked Personal Tax Deductions & Credits for Individuals

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Tax time is stressful. It helps to be aware of possible deductions ahead of time so you can keep appropriate documentation to maximize your deductions and credits and pay the lowest tax possible.

Even the IRS encourages you to take every legitimate means to reduce your tax liability. The following deductions and credits are frequently overlooked. Review them to make sure you don’t miss any you’re eligible for.

Top Overlooked Tax Deductions

1. Tax Preparation Fees

(Schedule C, E, or F)

You used to be able to deduct the costs of preparing your taxes as a miscellaneous deduction on Schedule A. Unfortunately, the Tax Cuts and Jobs Act of 2017 (TCJA) eliminated most miscellaneous itemized deductions, including tax prep fees, so the cost of preparing your personal tax return is no longer deductible.

However, you can still deduct fees for preparing Schedule C for a small business, Schedule E for rents or royalties, or Schedule F for farm income on those schedules. You can also deduct the cost of tax preparation software (TurboTax, H&R Block, etc), tax publications, or a fee for electronically filing your taxes. If you paid your taxes by debit or credit card, you can also deduct any convenience fees. You’ll need to break out the portion of the fees applicable to each form.

2. Personal Legal Bills

(Schedule C, E, or F)

Personal legal bills are another miscellaneous itemized deduction that went away thanks to the TCJA, so they’re no longer deductible. However, much like the deduction for tax preparation fees, if all or a portion of your legal fees stem from your business, a rental property, or a farm, you can deduct those fees on Schedule C, E, or F.

3. Educator Expenses

(Schedule 1, Line 10)

If you’re an eligible educator, you can deduct up to $250 of unreimbursed expenses for professional development courses, books, supplies, computer equipment, related software or services, other equipment, and supplemental materials for classroom use.

You are an “eligible educator” if you worked as a K-12 teacher, instructor, counselor, principal, or aide for at least 900 hours in an elementary or secondary school. If you and your spouse are both educators and file jointly, you can each deduct up to $250 of your own expenses.

For limitations on these amounts, see Tax Topic 458.

4. Charitable Miles

(Schedule A, Line 12)

Most people know that cash or goods donated to charities can generate a tax deduction if you itemize. Yet many overlook the fact that the miles they drive to do charitable work are also deductible at a rate of $0.14 per mile for 2019. You can also deduct tolls and parking fees. If you use your vehicle in your charitable work, keep a log of those miles and claim them at tax time as an itemized deduction.

5. Contributions to Fraternal Orders or Societies

(Schedule A, Line 10)

Dues required for membership in fraternal orders and societies are not deductible. Donations above required dues are deductible as long as the organization will use them for qualified charitable purposes.

For example, contributions to a Shriners Hospital fund are one such deduction. You may claim these deductions up to 30% of your adjusted gross income (Form 1040, line 8b).

6. Losses Due to Theft or Casualty

(Schedule A, Line 15)

Taxpayers used to be able to deduct losses caused by theft, vandalism, fire, storm, or similar causes, as well as car, boat, and other accidents. Thanks to the TCJA, casualty and theft losses are only deductible if they resulted from a federally declared disaster. There are three limits on the losses you can claim:

  1. You can only deduct amounts not reimbursed by insurance.
  2. Each separate casualty or theft loss must be more than $100.
  3. The total amount of all losses (per the $100 limitation mentioned above) must be higher than 10% of AGI (Form 1040, line 8b).

To figure the amount of the deduction, you must complete Form 4684, Casualties and Thefts. For more information, consult Tax Topic 515 or Publication 547, Casualties, Disasters, and Thefts.

7. Retirement Savings Contribution Credit

(Schedule 3, Line 4)

You may be eligible for this nonrefundable credit if you contribute to an eligible retirement plan, such as a 401(k) plan at work or a traditional or Roth IRA through a broker like TD Ameritrade. The credit can be as much as $1,000 ($2,000 if married filing jointly). The maximum contribution on which the credit is based is $2,000 ($4,000 if married filing jointly).

The amount of the credit varies between 10% and 50% of your contribution, depending on your AGI and filing status. See Form 8880 to determine your percentage factor from the table of income brackets and filing statuses.

You cannot claim this credit if your AGI is above these amounts:

  • Single, Married Filing Single, or Qualifying Widow(er): $30,750
  • Head of Household: $46,125
  • Married Filing Jointly: $61,500

For more information, see our Retirement Contribution Credit Guide.

Pro tip: If you have either an IRA or 401(k), you’ll want to sign up for a free portfolio analysis from Blooom. Simply connect your account, and you’ll quickly be able to see how you’re doing, including risk, diversification, and fees you’re paying.

8. Education Credits

(Schedule 3, Line 3)

Many people take courses at community colleges, colleges, or universities to maintain or improve skills. Others complete continuing education credits to maintain certification, pursue a hobby or other special interest, or for self-improvement. Sometimes, students who aren’t in a degree program overlook the maximum $2,000 tax benefit of the Lifetime Learning Credit.

To claim the credit, you must meet three requirements:

  1. You must pay qualified expenses for higher education.
  2. You must pay those expenses for an eligible student.
  3. The eligible student must be you, your spouse, or a dependent you claim on your tax return.

According to IRS Publication 970, qualified expenses are “tuition and certain related expenses required for enrollment in a course at an eligible education institution. The course must be either part of a postsecondary degree program or taken by the student to acquire or improve job skills.” So those hobby-related and self-improvement courses are not qualifying expenses unless they’re also job-related.

You must subtract from your educational expenses by any tax-free educational assistance – such as scholarships, grants, employer-provided assistance, or veterans’ education benefits – you receive.

The credit is 20% of the first $10,000 in qualified educational expenses. You can claim it on Form 8863.

You’ll use the same form to claim the American Opportunity Credit. The American Opportunity Credit is the best known of the education credits. It’s a tax credit of up to $2,500 of tuition, fees, and course materials – not necessarily purchased from the educational institution. Up to 40% of that amount, or $1,000, may be refundable. The credit is based on maximum qualifying expenses of $4,000 and is calculated as 100% of the first $2,000 and 25% of the next $2,000. Up to $1,000 is refundable, even if you have no tax liability.

Three things to keep in mind:

  1. The American Opportunity Credit only applies to the first four years of undergraduate post-secondary study.
  2. You cannot claim more than one education credit for the same student in the same year. You also cannot claim the Tuition and Fees Deduction in the same year you claim either education credit.
  3. You cannot claim any education credits if your filing status is married filing separate.

9. Property Taxes on a Timeshare

(Schedule A, Line 5b)

You can deduct the property taxes you pay on a timeshare as an itemized deduction. These taxes are included in your annual maintenance fee and may be stated separately on the statement. If you sold a home or timeshare, any property taxes paid should be noted on the settlement statement.

But take care to check if the buyer reimbursed any property taxes. If you receive a 1099-S, the reimbursed amount appears in Box 6.

10. Last Year’s State Income Taxes

(Schedule A, Line 5)

If you owed state taxes in 2018 and paid them in 2019, deduct them as an itemized deduction on Schedule A on your 2019 tax return.

Instead of deducting state income tax, you may choose to deduct state general sales tax. You may deduct your actual sales tax if you kept all of your receipts, or you can use the worksheet and the state and local sales tax tables in the Instructions for Schedule A.

If you choose this option, you can also include the sales tax on big-ticket items, such as a vehicle, boat, airplane, or materials for renovation if the invoice lists sales tax separately. The general sales tax depends on your family size, your AGI, and the state in which you live.

11. Penalty on Early Withdrawal of Savings

(Schedule 1, Line 17)

If you cashed in a CD, for example, before its maturity date, the bank might have charged a penalty. This penalty usually appears in Box 2 of Form 1099-INT. You can deduct the penalty as an adjustment to income, which lowers your AGI. You might also find an early withdrawal penalty in Box 3 on Form 1099-OID if you receive one.

12. Medicare B and D Premiums

(Schedule A, Line 1)

If you itemize deductions, you can deduct the premiums for Medicare Parts B and D as a medical expense. Also, if you’re not entitled to Social Security benefits, you can deduct premiums you voluntarily paid for Medicare Part A coverage. You’ll only get a benefit from this deduction if your total medical expenses are greater than 7.5% of your AGI.

13. Breastfeeding Equipment and Pumps

(Schedule A, Line 1)

According to the Instructions for Schedule A, the cost of breast pumps and supplies that assist lactation are deductible medical expenses. Since these devices and supplies can be expensive, adding them to your medical expenses may help you exceed the 7.5% medical deduction threshold.

14. Credit for the Elderly or Disabled

(Schedule 3, Line 6)

If you’re 65 or older by the end of the tax year, or you’re retired on permanent and total disability and you received taxable disability income, you may qualify for this credit. The amount of the credit ranges from $3,750 and $7,500. To calculate and claim the credit, complete Schedule R.

This is a nonrefundable credit, which means it can reduce your tax liability to zero, but you won’t receive a refund over and above the tax you paid in for the year.

The income limits to qualify for this credit are:

  • Single, Head of Household, or Qualifying Widow(er): AGI of $17,500 or $5,000 nontaxable Social Security and pensions
  • Married Filing Jointly With One Spouse Eligible: AGI of $20,000 or $5,000 nontaxable Social Security and pensions
  • Married Filing Jointly With Both Spouses Eligible: AGI of $25,000 or $7,500 nontaxable Social Security and pensions
  • Married Filing Separate and Living Apart: AGI of $12,500 or $3,750 nontaxable Social Security and pensions

Final Word

It may seem cumbersome to keep track of all these deductions and credits as there are so many qualifiers. But they can add up to sizable savings and help reduce your taxable income and overall tax burden. Keeping a set of files on paper or electronically to record qualified expenses as they occur can help simplify the process at tax time. By using online tax preparation software from a company like TurboTax, you’ll have a better understanding of the different deductions and credits you can claim.

For help with other issues, check out our complete Tax Guide.

Which of these credits and deductions are you taking advantage of? Were there any you weren’t aware you were eligible for?

Janet Berry-Johnson
Janet Berry-Johnson is a Certified Public Accountant. Before leaving the accounting world to focus on freelance writing, she specialized in income tax consulting and compliance for individuals and small businesses. She lives in Omaha, Nebraska with her husband and son and their rescue dog, Dexter.

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