A tax deduction is a provision that lowers the amount of taxable income. A standard deduction is a single, fixed-amount deduction. Itemized deductions are popular with higher-income taxpayers because they frequently have significant deductible expenses such as state/local taxes paid, mortgage interest, and charitable contributions.
As you go through your credit card and bank statements in preparation for your 2022 tax filing, you may begin to wonder about all of the different deductions you can make that could potentially lower your overall tax bill.
While some are obvious, such as IRA contributions or student loan interest, others may be less obvious, and if you file your own tax return, you may miss out on these deductions.
Here are five unusual tax deductions that accountants say many people are unaware they are eligible for.
1. Expenses related to your pet
You might not think that having a pet could be a tax deduction, but there are a few situations where your dog, cat, or even lizard could help you save money.
For example, if your pet helps your business with rodent control, it can be considered a business expense. The IRS, on the other hand, requires that the pet lives on the business premises full-time in order for the expenses to be claimed.
You can also claim pet-related deductions if your pet earns money, whether through social media brand deals or being featured in ads or movies.
If your dog is a service animal, you can deduct its expenses. She does, however, mention that you must itemize in order to take these deductions — you can deduct expenses that exceed 7.5% of your adjusted gross income.
2. Jury pay is given to the employer
If you were chosen for jury duty in 2022, you might be able to deduct it from your tax return.
According to Corcoran, some employers will request your pay from jury duty because they are paying you while you are performing your civic duty. If this is the case, you can deduct the amount paid to your employer to avoid paying income taxes.
3. Gambling losses
Perhaps you placed a few too many bets in 2022 and lost a significant amount of money. You should not be afraid to claim gambling losses as a tax deduction.
You can, however, only do so to the extent of your winnings. If you go this route, keep in mind that you must report all of your winnings as taxable income on your tax return.
4. Cost of childcare
You can deduct the cost of childcare in addition to receiving tax credits and deductions for having a child.
Working taxpayers with dependent children can claim a tax credit for the cost of childcare while they are employed or actively seeking employment. The cost of a babysitter, housekeeper, or cleaner is one example of an eligible expense.
5. Out-of-pocket charitable deductions
If you volunteered with any charities last year, you may be able to deduct the costs of your contributions.
You can deduct out-of-pocket expenses related to your charitable work. Deductions could include, for example, vehicle gas or supplies purchased for charity work done the previous year.
Should I Itemize My Deductions?
The decision to itemize deductions is usually based on whether your eligible itemized deductions exceed the amount of your applicable Standard Deduction. If you have few expenses, you’re better off taking the Standard Deduction.
You may be better off itemizing your deductions if you have a significant amount of expenses that can be used as itemized deductions and exceed the Standard Deduction.
Even if you don’t itemize, you may be able to claim a number of above-the-line deductions, lowering the amount of income subject to federal taxation. You can begin lowering your tax bill by taking advantage of the popular tax deductions listed above.
