Some Often Overlooked Tax Breaks

Maicher CPA Pllc is skilled at helping clients find tax breaks.  This includes those that are sometimes overlooked.   What are some significant examples?   

Child/Dependent Care Credit

While parents work or search for work, the child/dependent care tax credit applies  to the following expenses for a child (those generally under 13):  (a) education expenses related to  nursery, preschool or other programs below kindergarten level, (b) before-school and after-school care, (c) transportation costs paid to a transporter to and from the place where the care is provided, and (d) care outside of the home by a qualified personal care provider.  Also, with summer approaching, the credit may also apply to non-overnight summer camp expenses.

Non-Business Bad Debt Expense Deduction

The deduction applies to certain non-business bad debt expenses.  Bad debt expenses may include, for example: (a) unpaid loans and (b) incomplete services for which the taxpayer has paid.  Keep in mind that this deduction only applies to debts that are totally worthless. Totally worthless means there’s no reasonable expectation that the debt will be repaid.  This deduction further requires taxpayers to have made legitimate efforts to recoup the money (but doesn’t necessarily require the court proceedings).  Legitimate efforts include such activities as written requests and phone calls to the debtor.  Lastly, this deduction requires a detailed statement of: the amount owed, the debtor’s name, a description of the business/family relationship between the parties, the efforts made to collect the debt and an explanation why the debt is worthless. 

Self-Employed Health Insurance Deduction 

Self-employed taxpayers paying health insurance premiums may be able to deduct premiums paid for themselves and their family members, including children less than 27 years old.  Health insurance premiums, include premiums for medical, dental and long-term care premiums. This deduction requires that the taxpayer’s business has a net profit, i.e., gross income minus deductions.   If the business doesn’t have a net profit, the premium amount is an itemized deduction on Form 1040 federal tax return, Schedule A.

Personal Protective Equipment (PPE)

The purchase of PPE, like masks, hand sanitizer and wipes, are deductible as medical expenses to the extent a taxpayer’s medical expenses exceed 7.5% of their adjusted gross income.  

Take-away:  Maicher is skilled at helping clients find often overlooked tax breaks.  Call Maicher to see what you may be missing.  

Sources:

5 Overlooked and Popular Tax Breaks You Can Claim On Your Tax Return, Forbes (Feb. 22, 2023).

Don’t Overlook These Valuable Tax Write-Offs, U.S. News & World Report (Jan. 31, 2023). 

IRS Publication – Topic No. 453, Bad Debt Deduction (April 6, 2023).

IRS Publication – Topic No. 503, Child and Dependent Care Expenses (Jan. 6, 2023).