Deductions and Exemptions

According to recent reports, taxpayers overpay by nearly a billion dollars a year by taking advantage of all the credit, deduction, and income adjustments they are entitled to. We’ve compiled a list of the 12 most overlooked tax deductions. Ensure that these apply to you and your dental practice by speaking to your accountant.

State income tax and state sales tax may be deducted from taxable income by taxpayers. There are not many people who are aware that sales tax can be deducted. Especially if you keep your receipts, it’s a great deduction to take advantage of if you live in one of the few states without income tax.

Charitable expenses incurred out of pocket: You might not realize that out-of-pocket costs are tax-deductible. Currently, the limit on charitable contributions is 60% of adjusted gross income (from 50% previously). Providing sports teams with sponsorships, making travel arrangements, and booking lodging are all factors that contribute to volunteer work.

The parent who both owes and is paying off the loan interest used to be the person who could deduct the interest from the student’s loan. Now, students can deduct the interest they pay on loans regardless of who pays the bill, as long as they are not claimed as a dependent.

Relocating for your first job: Most taxpayers know that moving expenses related to a new job are deductible. However, recent college graduates moving more than 50 miles from home are also eligible to write off their moving costs.

How much does it cost to look for a Dental job? Are you considering a change of practice? It is deductible to pay for job-search costs. Even if you don’t get hired, you will have to spend money on resume preparation, employment agencies, flight tickets, taxis, and printing. Amounts exceeding 2 percent of adjusted gross income are not subject to this limitation.

Child care expenses over the summer: Parents can claim a credit for child care expenses incurred over the summer.

The amount of points you paid when you refinance your mortgage can be deducted all at once when you buy a home. As part of the refinancing process, you can take the points off as well. It is necessary to deduct refinancing points over the lives of the loans. A seller or a borrower who pays off the loan is allowed to deduct all of the points not deducted already (unless they refinance with the same lender).

Interest on home equity loans and lines of credit with higher limits: As of 2021, the interest on home equity loans used for anything other than capital improvements on your primary residence is no longer deductible. HELOCs (Home Equity Line of Credits) and second mortgages are tax-deductible for homeowners who (a) use the loan for “substantial improvements” to their home, and (b) their combined first mortgage and their HELOC or second mortgage do not exceed $750,000.

Looking for a way to strengthen your practice’s financial acumen? Consider obtaining a lifetime learning credit. College students (whether pursuing a degree or not) can apply for this credit, which provides a 20 percent tuition credit, for a sum of up to $2,000 on up to $10,000 in tuition. You or your spouse or your dependents may be eligible for the credit if you or they are enrolled at an eligible institution and you paid their college expenses.

A working person’s employer-based reimbursement account used to provide a child care credit of up to $5,000. A credit of up to $6,000 is now available (although the $5,000 credit remains for reimbursement accounts).

Tax credits for children under 17 have doubled from $1,000 to $2,000 each. Limits on eligible income have increased from $75,000 to $200,000 (single filers) and from $110,000 to $400,000 (married filing jointly). It is possible to receive a $1,400 credit per child even if a taxpayer has no tax liability.

A deduction you missed last year doesn’t mean that it’s all lost. The IRS allows you to carry over numerous deductions if you don’t use them immediately. Depending on your tax preparer, holdover deductions may include business losses from your dental practice and charitable contributions.

You can dramatically reduce the amount of tax you pay by taking advantage of these credits and deductions, conducting research, and hiring a skilled tax preparer.