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Tax season officially begins Monday when the Internal Revenue Service (IRS) will begin accepting returns for the 2024 tax year, but taxpayers should be aware of deductions and credits that could be worth thousands before they file, a tax expert warns.
Karla Dennis, CEO and founder of KDA, Inc., a tax strategy agency, told FOX Business that taxpayers run the risk of leaving upwards of $2,500 to $5,000 on the table due to a lack of awareness of certain tax credits and deductions that they may be eligible to claim and reduce the amount of taxes they’re on the hook for.
“Many taxpayers are leaving money on the table,” Dennis said. “I’ve been in the industry for 30-plus years and when I work with individuals taxes and talk with them, I realize they’re very unaware of a lot of the various tax credits that they can use to offset their tax liability.”
Various tax credits and deductions are available to taxpayers who’ve spent money on certain activities such as education, medical expenses, state and local taxes and more.
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Taxpayers should familiarize themselves with tax credits and deductions they may be eligible for prior to filing their tax return. (Michael Bocchieri/Getty Images / Getty Images)
“Many taxpayers are changing careers, they’re going back to school, they’re getting higher education, and they’re not familiar with the lifetime learning credit, the American opportunity credit, and these can help to reduce their overall tax liability,” Dennis said.
She added that the American opportunity credit can be refundable for up to $1,000 which can be helpful for people looking to pay for classes and other expenses while in school.
Dennis said that taxpayers should monitor their spending on healthcare activities over the course of the year because they can be eligible for the medical expense deduction if that spending exceeds 7.5% of their adjusted gross income. For example, based on an income of $50,000 the taxpayer can deduct expenses above $3,750.
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Tax credits and deductions can help taxpayers minimize their tax liability. (iStock / iStock)
“They need to take advantage of writing off their insurance premiums if they’re not pre-tax through an employer,” Dennis explained.
“There’s the long-term care premiums that are a write-off, in addition to the co-pay for going to the doctor, to the emergency room, to the office visit, the pharmaceutical payment you make to the pharmacy to get prescriptions filled,” she added. “Even driving to and from the doctor you can take the mileage as a write off.”
The state and local tax (SALT) deduction is available up to a cap of $10,000 for taxpayers who itemize their returns. Dennis said taxpayers claiming the deduction should make sure they’re aggregating their income taxes, property taxes and DMV fees.
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The IRS’ tax filing season for the 2024 tax year begins Monday, Jan. 27. (Photo by J. David Ake/Getty Images / Getty Images)
Dennis said that individual taxpayers should “be mindful and realize that taxes are all year from January to December” so they should consider talking to a tax advisor earlier in the year to plan ahead.
She recommends that taxpayers do what she calls her “12 by 12” in which they look at their expenses for each month of the year one at a time over the course of a 12-day period, which she believes helps taxpayers avoid feeling overwhelmed at the last minute and forgetting things that could’ve saved them money when they filed their taxes.
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Dennis added that taxpayers may benefit from pausing before filing their return once it’s ready to be filed so that they can think about something they may have forgotten so that they can add it before filing and avoid having to amend their return.
