IN THIS ISSUE
DID YOU KNOW?
Home Office Deduction for Remote Employees
Educator Expenses Deduction
Job Search Expenses
Pet-Related Deductions
Health Insurance Premiums for the Self-Employed
Charitable Volunteer Expenses
Moving Expenses for Military Personnel
Student Loan Interest Paid by Someone Else
Gambling Losses
Energy-Efficient Home Improvements
Medical Expenses for Travel
Hobby Expenses
State Sales Tax Deduction
Casualty and Theft Losses
Investment Interest Expenses
Uncommon Tax Deductions That Could Save You Thousands
by Audrey Jackson
Did You Know?
Tax season is often met with a mix of dread and anticipation. While many people focus on the standard deductions—such as mortgage interest, charitable contributions, and medical expenses—there are numerous lesser-known tax deductions that could save you thousands of dollars if you know where to look. These uncommon deductions are often overlooked, but they can make a significant difference in reducing your taxable income and boosting your refund. In this essay, we’ll explore some of these hidden gems, providing you with the knowledge to maximize your tax savings.
Home Office Deduction for Remote Employees
The rise of remote work has made the home office deduction more relevant than ever. While self-employed individuals have long been able to claim this deduction, many employees don’t realize that they may also qualify. If you use a portion of your home exclusively for work, you can deduct expenses such as rent, utilities, and internet costs. The key here is that the space must be used regularly and exclusively for work purposes.
There are two methods to calculate this deduction:
Simplified Method: A standard deduction of $5 per square foot of home office space (up to 300 square feet).
Regular Method: Calculating the actual expenses based on the percentage of your home used for work.
Even if you’re an employee, it’s worth discussing this with your employer or a tax professional to see if you qualify.
Educator Expenses Deduction
Teachers and educators often spend their own money on classroom supplies, and the IRS acknowledges this with a special deduction. Educators can deduct up to 250 of out−of−pocket expenses for classroom materials, such as books, supplies, and even computer equipment. If you’re married and both spouses are educators, you can each claim the 250 deduction, totaling $500.
What makes this deduction particularly appealing is that it’s available even if you don’t itemize your deductions. This is a small but meaningful way to offset the costs that educators often bear to create a positive learning environment for their students.
Job Search Expenses
Looking for a new job can be expensive, but did you know that some of these costs may be deductible? If you’re searching for a job in the same field, you can deduct expenses such as resume preparation, travel to interviews, and even agency fees. However, there are a few caveats: the deduction is only available if you’re not reimbursed by an employer, and it’s subject to the 2% rule for miscellaneous itemized deductions. This means you can only deduct the amount that exceeds 2% of your adjusted gross income.
While this deduction was temporarily suspended under the Tax Cuts and Jobs Act (TCJA) from 2018 to 2025, it’s worth keeping in mind for future tax years or if you qualify under specific circumstances.
Pet-Related Deductions
Pet owners may be surprised to learn that some pet-related expenses can be deductible. For example, if you foster animals for a qualified nonprofit organization, you can deduct costs such as food, veterinary care, and supplies. Additionally, if you have a service animal for a disability, expenses related to the animal’s care and training may be deductible as medical expenses.
While the IRS doesn’t allow deductions for general pet care, these specific scenarios can provide significant savings for those who qualify.
Health Insurance Premiums for the Self-Employed
Self-employed individuals often face higher healthcare costs, but they can deduct 100% of their health insurance premiums, including those for dental and long-term care coverage. This deduction is taken on Schedule 1 of Form 1040 and is available even if you don’t itemize your deductions. It’s important to note that this deduction only applies to premiums paid for yourself, your spouse, and your dependents. If you’re eligible for this deduction, it can provide substantial tax savings, especially given the rising cost of health insurance.
Charitable Volunteer Expenses
If you volunteer for a qualified nonprofit organization, you may be able to deduct certain expenses related to your volunteer work. This includes mileage driven for charitable purposes (at a rate of 14 cents per mile in 2023), as well as out-of-pocket expenses like supplies or uniforms. However, you cannot deduct the value of your time or services. To claim this deduction, you’ll need to itemize your deductions and keep detailed records of your expenses. This is a great way to give back to your community while also reducing your tax liability.
Moving Expenses for Military Personnel
While the TCJA eliminated the moving expense deduction for most taxpayers, it remains available for active-duty military personnel who are required to relocate due to a permanent change of station. This includes deductions for transportation, lodging, and storage costs. If you’re in the military, this deduction can provide significant savings, especially if you’re moving long distances or overseas. Be sure to keep detailed records of your expenses to support your claim.
Student Loan Interest Paid by Someone Else
If someone else, such as a parent or grandparent, pays your student loan interest, you may still be able to claim the student loan interest deduction. The IRS allows the borrower to deduct up to $2,500 in student loan interest, even if the payments were made by someone else. This can be a valuable deduction for recent graduates or those still paying off student loans. To qualify, the loan must have been used for qualified education expenses, and your income must be below the IRS threshold.
Gambling Losses
While gambling winnings are taxable, you can offset them by deducting gambling losses—up to the amount of your winnings. This includes losses from casinos, lotteries, and even sports betting. To claim this deduction, you’ll need to itemize your deductions and keep detailed records of your wins and losses, including receipts, tickets, and statements. While this deduction won’t result in a net gain, it can help reduce the tax burden on your gambling winnings.
Energy-Efficient Home Improvements
If you’ve made energy-efficient upgrades to your home, you may be eligible for tax credits. The Residential Energy Efficient Property Credit allows you to claim a percentage of the cost of qualifying improvements, such as solar panels, wind turbines, and geothermal heat pumps. Additionally, the Nonbusiness Energy Property Credit provides a credit for improvements like energy-efficient windows, doors, and insulation. These credits can significantly reduce your tax liability while also helping the environment.
Energy-Efficient Home Improvements
Medical expenses can add up quickly, and the IRS allows you to deduct certain travel-related costs if they’re necessary for medical care. This includes mileage driven to and from medical appointments (at a rate of 22 cents per mile in 2023), as well as airfare, lodging, and meals if you’re traveling for medical treatment. To qualify, the travel must be primarily for and essential to medical care. This deduction can provide relief for those facing high medical costs, especially if they require specialized treatment far from home.
Hobby Expenses
If you have a hobby that generates income, you may be able to deduct expenses related to that hobby. While hobby expenses are no longer deductible under the TCJA, you can still offset hobby income with hobby expenses, as long as you itemize your deductions. This includes costs such as supplies, equipment, and travel. However, it’s important to note that the IRS distinguishes between hobbies and businesses, so be sure to keep detailed records and consult a tax professional if you’re unsure how to classify your activity.
State Sales Tax Deduction
If you live in a state with no income tax, you may be able to deduct state and local sales taxes instead. This deduction is particularly beneficial for those who make large purchases, such as cars or boats, during the tax year. You can use the IRS’s sales tax deduction calculator to determine the amount you can claim. This deduction is available whether you itemize or take the standard deduction, making it a valuable option for many taxpayers.
Casualty and Theft Losses
While the TCJA limited the deduction for casualty and theft losses to federally declared disaster areas, it’s still worth considering if you’ve experienced a significant loss due to a natural disaster or theft. You can deduct the amount of the loss that exceeds 10% of your adjusted gross income, minus $100. This deduction can provide financial relief for those who have suffered unexpected losses, but it’s important to document the loss thoroughly and consult a tax professional to ensure you meet the IRS requirements.
Investment Interest Expenses
If you’ve taken out a loan to invest in stocks, bonds, or other income-producing assets, you may be able to deduct the interest on that loan. The deduction is limited to your net investment income, and any excess can be carried forward to future tax years. This deduction can be particularly valuable for those with significant investment portfolios, as it helps offset the cost of borrowing to invest.
Conclusion
Tax season doesn’t have to be a source of stress. By taking advantage of these uncommon tax deductions, you can significantly reduce your taxable income and potentially save thousands of dollars. Whether you’re a remote worker, an educator, a pet owner, or someone who’s experienced a significant loss, there are deductions available that can help ease your financial burden. However, it’s important to keep detailed records and consult a tax professional to ensure you’re maximizing your savings while staying compliant with IRS regulations. With a little effort and knowledge, you can turn tax season into an opportunity for financial growth and stability.