6 Tax Credits and Deductions You May Have Overlooked
March 24, 2022 by Chevron Federal Credit Union
Tax season is in full swing, with the federal income tax filing deadline of April 18 for most filers sneaking up soon. To help trim your 2021 tax bill, it pays to make the most of commonly overlooked tax deductions — and certain credits that have changed for the year. (Tax deductions lower your taxable income, while tax credits are a dollar-for-dollar reduction.) Looking for some last-minute, money-saving ideas that may have flown under the radar? Check out these six tax tips now.
1. Home COVID-19 tests, masks and sanitizers
If you bought COVID-19 home tests or masks, hand sanitizer and sanitizing wipes to prevent the spread of the virus (and who among us didn’t), the IRS says they’re eligible medical expenses. That makes them tax-deductible for people who itemize and whose expenses aren’t reimbursed. And it also makes these costs reimbursable under FSAs or HSAs as well. Note: You can only deduct the cost to the extent that total eligible medical and dental expenses in 2021 exceed 7.5% of adjusted gross income.
2. Classes, job-skill training and continuing education
Did you brush up on job skills or take a course? The Lifetime Learning Credit can be claimed for any number of years and can be used to offset the cost of higher education for you or your spouse — not just your kids. This credit is worth up to $2,000 a year, based on 20% of up to $10,000 you spend for post-high-school courses that lead to new or improved skills. And you don’t have to be pursuing a program leading to a degree or other type of credential. Note that the ability to claim this tax-saver on your 2021 return phases out as income rises.
3. Retirement savings contributions
Stashing more cash for your future can help trim your tax bill, too. If you don’t have a retirement plan at work, or have an individual retirement account (IRA) on your own, you can deduct up to $6,000 in contributions to a traditional IRA for 2021, or $7,000 if you’re 50 or older. And you have until the April tax deadline to contribute to an IRA for 2021.
4. Child tax credit facts
For the 2021 tax year, parents can claim $3,600 for each child younger than six and $3,000 for each child between six and 17 years old. As income rises, the child tax credit is reduced in stages. The IRS sent advance payments for the credit to families from July to December 2021. Unless you opted out, the amount you received in advance will be subtracted from your total child tax credit when you claim it on your 2021 return. What’s more, if your children are younger than 13, you also may be eligible for a 20% to 50% credit for up to $8,000 in childcare expenses for one child or $16,000 for two or more.
5. Green, clean and mean energy savers
Did you drive away with a plug-in electric car or motorcycle last year? You might qualify for a tax credit of up to $7,500 on the purchase — whether it’s for personal or business use. Take a look at Form 8936 to figure the credit amount. Homeowners should also double check their record of energy-efficient improvements. Installing everything from insulation to solar could slice up to $500 off the tax bill. See Form 5695 for details.
6. Lap pools, mattresses and gluten-free goodies, oh my
In the “call it unusual” category for itemizers of medical expenses: Install a pool — say, for a medically recommended exercise regimen connected to a diagnosis — and a taxpayer might be able to write off the cost of it plus maintenance, less the amount that the home increased in value because of the pool. Similarly, if a special bed or mattress was prescribed by a doctor to help a back problem or sleeping disorder, you may also be able to deduct the cost. And what if you’re told to follow a gluten-free diet? You could deduct the difference between the cost of your new meal regimen versus the old one if it costs more and is ordered by your healthcare provider. Note: You can only deduct the cost to the extent that total eligible medical and dental expenses in 2021 exceed 7.5% of adjusted gross income.
Making tax time less taxing
There’s still time to snag some useful tax credits and deductions — and maybe discover a few you didn’t know about. As you’re gathering paperwork and adding up the numbers, make sure to consult a tax professional who understands your personal financial situation and can help you maximize the tax-saving strategies you deserve. Chevron FCU does not provide personal tax advice, and the tips outlined here may or may not apply to your individual situation.