What extra tax deductions should I make sure to take?
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.
Key Takeaways
- You might be able to claim the Child and Dependent Care Credit, which covers a percentage of child and dependent care costs if you have a dependent child who's 12 years old or under when the care is provided, or a qualifying adult dependent.
- You might be able to decrease the taxes you owe or even receive a refund by claiming the Earned Income Tax Credit if you meet certain income requirements.
- If you purchase a health plan through the Health Insurance Marketplace and fall within certain income limits, you might qualify for the premium tax credit.
- For tax years prior to 2018, you might be able to deduct job hunting expenses, including mileage and transportation costs, printing and postage, and recruiting and employment agency fees.
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 childcare 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 when the care is provided; 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 are required to 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 2024, the upper limit of earned income ranges from $18,591 for those with no qualifying children to $66,819 for those Married Filing Jointly with three or more qualifying children.
TurboTax Tip:
If you have earned income of $18,561 or less in 2024, you might qualify for the Earned Income Tax Credit, even if you don't have children. If you do have children, the 2024 upper limit of earned income is $66,819 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:
- purchase a health plan through the Health Insurance Marketplace
- can’t be claimed as another person’s dependent
- fall within certain income limits
- do not qualify for health insurance from the government or an employer
- 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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