Your Guide To Overlooked Tax Deductions For 2024

Paying as little in taxes as possible: Music to your ears, right?

You might wonder what deductions you can get besides the usual contributions to an IRA or 401(k), first-time home buyer, charitable contributions and medical expenses.

The 2017 Tax Cuts and Jobs Act (TCJA) changed what can qualify as a tax deduction and who can take advantage of certain deductions. You may even be surprised by a few and some may seem downright strange.

We'll go over some unusual and overlooked tax deductions you can take to benefit your financial situation. This is intended to be informational and not personalized advice. Consult your tax advisor about your individual situation.

Tax Deductions Vs. Tax Credits

First, what's the difference between tax deductions and tax credits? Tax deductions lower adjusted gross income (AGI), while tax credits reduce the total amount owed.

In other words, a tax deduction reduces your total income subject to taxes. A deduction can put you in a different (lower) tax bracket. Tax credits, on the other hand, reduce the amount of tax you owe, dollar for dollar. A tax credit of $2,000 lowers your tax bill by that same amount – $2,000.

Standard Deduction Vs. Itemized: Which Is Better?

The TCJA changed the standard deduction, essentially doubling it. It may be less advantageous to itemize deductions than it would have been 5 years ago, and you should only itemize deductions if you exceed the standard deduction.

The current standard deduction levels for 2024 include the following:

• Single taxpayers and married individuals filing separately: $14,600
• Couples filing jointly: $29,200
• Heads of households: $21,900

When deciding whether to itemize deductions, it depends on what will save you the most money. If itemized deductions are more than standard deductions, itemizing makes more sense. Also, note that the Internal Revenue Service (IRS) allows you to write off state and local income tax or sales tax when itemizing deductions.

Itemizing can take longer because you'll need to fill out more forms and provide proof that you should receive those deductions. However, if your standard deduction is more than your itemized deductions and you want to save time, you should take the standard deduction.

Consult a tax professional or use reputable tax software to see which will allow you to pay less.

Home Mortgage-Related Tax Deductions

Here's a breakdown of a few home-related tax deductions.

• Mortgage points: You can deduct mortgage points, used to purchase a lower interest rate when you get a mortgage.
• Mortgage interest: The mortgage interest deduction lowers your taxable income through the itemized deduction. Through the TCJA, you can deduct $750,000 as a single filer or married couple filing jointly. For those married filing separately, the deduction is $375,000.
• Home equity loan or home equity lines of credit (HELOC) interest: A home equity loan, or a second mortgage on your house, allows you to borrow against the equity in your home to borrow funds you need for other purposes. A HELOC does the same, except it comes as a line of credit – you withdraw the money from your lender as needed. You can only deduct the amount used to buy, build or repair a home. For example, you can't deduct the interest if you use a home equity loan to pay off credit card debt.

Charitable Contributions

You can deduct out-of-pocket charitable contributions to a qualified organization. You'll face limits on charitable contributions of 60% of adjusted gross income (AGI) for cash contributions held for over a year and 30% of AGI for non-cash assets. In certain instances, the limit may be 50% of AGI.

You can also deduct non-cash donations if they range from $500 – $5,000 without an appraisal. Donations of more than $5,000 need an appraisal. It's important to note that if the donation includes certain clothing or household items, the threshold for an appraisal may be $500.

Work-Related Deductions

Most work-related expenses are for individuals with a small business or home-based business. However, you can deduct some expenses if you are employed full-time by someone else.

You must itemize work-related expenses, including auto and travel expenses, home office costs, dues to professional organizations, education expenses and more. Let's take a look at them in more detail.

Office Supplies

Most deductions for office supplies are limited to self-employed individuals with some exceptions. You can deduct items like:

• Computer, printers, software and internet hosting fees
• Office supplies, like paper, file folders and pens

Teachers can deduct up to $300 per year for school supplies they purchase with their own money.

Work-Related Education Expenses

You can deduct expenses related to education or training for career growth and development. The deduction is limited to self-employed individuals, Armed Forces reservists, eligible performing artists, qualified officials and state or local government, or disabled individuals with work-related education expenses. You can deduct tuition, books, lab fees, supplies, certain transportation and travel costs and even research costs.

Later on, you can also deduct student loan interest if you took out student loans.

Professional Organization Fees

You may be able to deduct professional organization dues and fees as long as the organization isn't political. However, you may not be able to deduct union dues unless you are self-employed. For example, you may be able to deduct chamber of commerce membership dues, trade association dues, civic or public service organization dues and dues for other professional organizations.

Uniforms, Costumes And Props

As a small-business owner or employee, you may be able to deduct work uniforms, props or costumes if you have to buy them out-of-pocket. For example, theatrical costumes, hard hats and other safety gear may qualify. It's important to note that this is an miscellaneous deduction, meaning to be deductible, the total of your miscellaneous deductions has to exceed 2% of your AGI.

Personal Casualty Losses

A casualty loss refers to damage or property loss resulting from a sudden, unexpected or unusual event such as an earthquake, fire, flood, terrorism, vandalism, volcanic eruptions, etc. You can no longer claim casualty and theft losses on personal property as itemized deductions unless a federally declared disaster causes your claim.

Home Office Expenses

Those working from home for an outside company may be unable to claim home office tax deductions. Instead, the deduction is limited to individuals who have a home-based or small business and have a dedicated space in their home that is devoted exclusively to that business.

You may be able to deduct expenses like mortgage interest, insurance, utilities, repairs and depreciation, too.

Moving Expenses

The TCJA ended the ability to deduct moving expenses, except for active-duty military personnel. Some states still allow them on your state tax return. Check with a tax professional in your area to determine your options.

You can deduct unreimbursed moving expenses for yourself, your spouse and dependents if you experience a permanent change of station due to a military order. You can deduct household goods, personal effects, storage and traveling expenses.

Medical And Dental Expense Deductions

Medical and dental expenses exceeding 7.5% of AGI are deductible. Medical and dental expenses can include things that you may not consider, including weight-loss equipment and nicotine patches. You may also be able to deduct fees to practitioners, inpatient hospital or nursing home care, inpatient treatment for drug or alcohol addiction, payments for transportation, payments for insurance premiums for medical care policies or long-term care facilities, etc. Check with your tax professional for more information. 

Pet Tax Deductions 

Pets may also be a source of overlooked deductions, including service and emotional support animals, fostering and working pets. Check with your accountant for more information about pet tax deductions for 2024.

Service And Emotional Support Animals

You may deduct service animals, defined as an animal trained to do work or perform tasks, such as medically necessary animals like Seeing Eye dogs or hearing-assistance dogs. Not all emotional support animals qualify.

You will need proof of the service animal, such as a doctor's prescription, documentation or a formal listing of the animal on a service animal registry. The documentation may have to list certification and training related to disability-related tasks.

Expenses Related To Fostering

If you foster pets or work at an animal shelter, you may be able to deduct the expenses related to caring for the pet as a charitable contribution. However, note that deductions don't apply once you take ownership of the pet. You can deduct veterinary expenses, pet supplies, cleaning supplies and even utility bills if your utilities went up because of your foster pets.

Working Pets

Working pets, such as animals involved in pest control or other functions for a small business, may qualify you for deductions. If you have a pet that earns money through performances or as an influencer, your income is taxable, but you can also deduct expenses.

Unusual Tax Deduction: Cat Food

You can also uncover unusual tax deductions related to pets. For example, a junkyard owner purchased cat food to attract stray cats in the area so they could deter mice and rats from congregating at his establishment – and claimed the cost of cat food as a business expense.

The Bottom Line: Build A List Of Tax Deductions Today

Are you missing out on hidden tax deductions? Taking advantage of tax deductions is a year-round process, not just for tax time. Keep track of your expenses throughout the year so you can recall the list come filing time. An accountant can help you, but it's always worth understanding tax rules yourself so you can say, "What about this or that?"

Get the Rocket Money^℠ app to help you view and organize finances and look for potential tax deductions.