Don’t Pay More in Taxes Than You Should: These Are the Most Overlooked Tax Deductions

By Brett Gottlieb

Tax season is here—and the last thing you want after the inflation and volatility of 2022 is to pay more in taxes than you should. Unfortunately, because of the complexity of the tax code and the near-constant influx of new rules and regulations, it can be difficult to keep track of what applies to your specific situation. Here are 6 of the most commonly overlooked tax deductions available that can help you save big on your tax return.

1. Out-of-Pocket Charitable Contributions

There’s more to charitable deductions than many people realize. Not only are the big-ticket contributions deductible, but the out-of-pocket expenses paid while volunteering or donating your time are also deductible too.

For instance, if you participate in charitable activities that involve up-front expenses, these are fully deductible on your tax return. Whether you purchase canned goods for a food drive or supplies for a local school fundraiser, your contributions are deductible. If you drove your car for charitable causes in 2022, you can also deduct 14 cents per mile and the cost of tolls.

Remember to keep your receipts and obtain verification for any contributions over $250 to make sure all your bases are covered.

2. Self-Employment Tax Deduction

For self-employed individuals, you can deduct a portion of the Social Security and Medicare tax you pay. Since self-employed individuals are required to pay both the employer and employee portion of Social Security and Medicare tax, there is a tax deduction available for the portion considered paid by the “employer.”

The full tax is 15.3% of net earnings, but you can write off 7.65% using this deduction. The best part is that this is an above-the-line deduction, which means it can be used in conjunction with the standard deduction.

3. Student Loan Interest

Another above-the-line deduction that many people forget about is the student loan interest deduction. This deduction allows the borrower to deduct up to $2,500 of student loan interest paid over the course of the year, even if the loan is repaid by someone else.

Here’s an example. If you took out a Parent PLUS Loan for your child to attend school and they have been the person making the payments, you can still deduct whatever interest was paid on your tax return since you are technically the borrower. In this case, the IRS assumes that your child gave you the money, and then you paid the debt yourself, thus allowing the borrower (not the payor) to receive the tax deduction.

With student loan payments on pause for the last two years, many people will not qualify. If you have consistently made payments, or if you have paid down the interest portion on any of your student loans in 2022, make sure to claim this deduction if your modified adjusted gross income is less than the phase-out threshold.

4. Medicare Premiums for Self-Employed Individuals

If you’re over the age of 65, enrolled in Medicare, and continuing to run your own business, then you can deduct the premiums paid for Medicare Part B and Part D as well as the cost of any supplemental policies or the Medicare Advantage plan.

The good news is this is an above-the-line deduction, so you do not have to itemize and the premium costs will not be subject to the 7.5% AGI floor that typically applies to medical expenses. Note that you are only eligible for this deduction if you are not also covered by an employer health plan, whether that be through a second job or through your spouse’s employer.

The even better news is that even if you are not 65 and enrolled in Medicare, you can still deduct the cost of healthcare (and long-term care) premiums if you are self-employed and not covered by an employer health plan.

5. State Income Tax Refund

Many people automatically assume they are required to report a state income tax refund as income on their federal tax return. But this is not actually the case. If you did not itemize your deductions to claim the state income tax paid, then any refund received is not considered income at the federal level.

Since most taxpayers claim the standard deduction and do not claim state and local tax deductions, the majority of those who receive a state income tax deduction do not need to report it on their Form 1040. Keep this in mind as you file your taxes this year, and don’t mistakenly report more income than is rightfully taxable.

6. Moving & Travel Expenses for Military Personnel

When the Tax Cuts and Jobs Act was signed in 2017, many taxpayers lost the ability to deduct moving expenses on their tax returns. But this deduction is still available for active-duty military personnel. If you or your spouse were an active-duty military member who relocated in 2022 and you did not receive a reimbursement from the government for your move, you will be able to deduct move-related expenses including the cost of travel, lodging, moving supplies, services, and shipping.

What’s more, military reservists and National Guard members are also able to deduct the cost of work-related travel as long as the travel is overnight and more than 100 miles away from home.

Don’t Miss Out on Important Tax Deductions & Credits

These are just a few of the most commonly overlooked tax deductions available, but you may qualify for others depending on your unique situation. It’s important to work with a professional who can advise on your specific circumstances.

At Comprehensive Advisor, we offer personalized financial planning advice to help you secure your future, and we can help you navigate the 2023 tax season with confidence. To get started, email us at info@ComprehensiveAdvisor.com or call (760) 813-2125 today.

About Our Advisors

Brett Gottlieb is the founder of Comprehensive Advisor and a financial advisor with nearly two decades of industry experience. He graduated from California State University-Chico with two bachelor’s degrees, in business administration and economics, and is Life Insurance licensed in several states. He is passionate about guiding his clients on retirement income planning, helping each client pursue their specific retirement goals, and defending the assets his clients have worked so hard to achieve. Brett is a California native and currently resides in San Elijo Hills with his beautiful wife and three children.

Our team of qualified professionals have experience in the financial service industry, and our advisors hail from some of the largest independent broker/dealers and banking institutions in the country. They have dedicated their professional careers to creating personalized financial solutions for individuals and families who seek successful retirement planning and currently offer investment advisory services through AE Wealth Management, LLC. Our advisors take a common-sense approach to the planning process and work with clients to create a retirement road map to help ensure their assets are protected and they receive the income needed to enjoy their future. Based in Carlsbad, California, they work with clients throughout San Diego County and beyond. Learn more by connecting with Brett on LinkedIn or email them at info@ComprehensiveAdvisor.com.

Investment advisory services made available through AE Wealth Management, LLC (AEWM). AEWM and Comprehensive Advisor are not affiliated companies. C.A. Financial & Insurance Services, CA Ins. Lic. #6000262. This material is intended to provide general information and is believed to be reliable, but accuracy and completeness cannot be guaranteed. Neither the firm nor its representatives may give tax or legal advice, individuals should consult with a qualified professional for guidance before making any purchasing decisions. Investing involves risk, including the potential loss of principal. Any references to protection benefits, safety, security, lifetime income, etc., generally refer to fixed insurance products, never securities or investment products. Our firm is not affiliated with the U.S. government or any governmental agency. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. 1712029- 3/23.