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What Extra Tax Deductions Should I Make Sure To Take?

Updated for Tax Year 2022 • December 1, 2022 09:15 AM


OVERVIEW

The federal government offers tax deductions and credits to reduce taxable income under certain circumstances. There are several that are often overlooked, including deductions for job hunting, caregiver expenses for dependents and children while you work, a credit to reduce taxes for moderate- to low-income earners and the premium tax credit associated with the Affordable Care Act. TurboTax can help determine if you qualify for these credits and deductions.


For information on the third coronavirus relief package, please visit our “American Rescue Plan: What Does it Mean for You and a Third Stimulus Check” blog post.


 

Best Extra Tax Deductions To Take

 

Dependent care tax credit

If have a caregiver look after your qualifying child or other individual while you look for work, you can claim the Child and Dependent Care Credit to receive a percentage of child care costs as a credit on your tax returns.

To be eligible for the credit, the dependent must be your child who is 12 years old or under; a mentally or physically incapacitated spouse who lives with you for at least half of the year, or: a mentally or physically incapacitated dependent (or meets other dependent-like requirements) who resides with you for at least half of the year.

A non-custodial parent is not eligible to be paid as a caregiver. Social Security numbers for all children, dependents and caregivers, along with addresses, must be included on your return.

Earned income tax credit

The earned income tax credit decreases the amount of taxable income for working individuals making a low to moderate income. It may also provide a refund in some circumstances. To qualify for the EITC, all of the following criteria must be met:

  • You, and your spouse, if you file a joint return, must have a valid Social Security number
  • You must be a U.S. resident or a year-round resident alien
  • You must meet the EITC earned income limits
  • You can't file as “married filing separately”
  • You can’t be a qualifying child of another person
  • You must have earned income from working, running a business or a farm
  • You can’t have earned foreign income

You also must have a qualifying child or be between the ages of 25 and 65, living in the United States and not be a dependent of another person. For 2022, the upper limit of earned income range from $16,480 for those with no qualifying children to $59,187 for those married filing jointly with three or more qualifying children.

Opt for the premium tax credit

If you purchase your health insurance from the Health Insurance Marketplace, don’t forget to claim the premium tax credit.

“If you qualify, you can estimate your income and opt to have the credit paid directly to the health insurance provider now,” explains Caroline Thompson, an accountant. “Or, you can wait and receive it at the end of the year.” To qualify for the premium tax credit, you are required to meet all of the following criteria:

  • You must purchase a health plan through the Health Insurance Marketplace
  • You can’t be claimed as another person’s dependent
  • You fall within certain income limits
  • You do not qualify for health insurance from the government or an employer
  • You must file a joint return if you are married

Job hunting expenses

For tax years prior to 2018, job hunting expenses can be an itemized deduction on your taxes. Provided it is not your first job, and the job you’re looking for is in the same line of work as your previous one, you can deduct qualifying expenses such as:

  • Mileage and transportation costs, including parking and tolls
  • Cost of printing business cards, resumes, advertising and postage
  • Recruiting and employment agency fees
  • Food and hotel costs

However, you can only deduct these and any other miscellaneous expenses if they exceed 2 percent of your adjusted gross income.

Beginning in 2018, job search expenses are no longer deductible for federal taxes but some states still allow these deductions.

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