Tax season formally begins Monday, when the Internal Revenue Service (IRS) begins taking returns for the 2024 tax year, but taxpayers should be aware of deductions and credits worth thousands of dollars before filing, according to a tax expert.
Karla Dennis, CEO and founder of KDA, Inc., a tax strategy firm, told FOX Business that taxpayers risk losing up to $2,500 to $5,000 due to a lack of awareness of certain tax credits and deductions that they may be eligible to claim to reduce the amount of taxes they owe.
“Many taxpayers are leaving money on the table,” Dennis explained. “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.”
Taxpayers who have paid for particular activities, such as education, medical bills, state and local taxes, and so on, are eligible for a variety of tax credits and deductions.
“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 told the crowd.
She also mentioned that the American Opportunity Credit can be refunded up to $1,000, which can be useful for students trying to pay for classes and other expenditures while in school.
Dennis advised taxpayers to keep track of their healthcare expenses throughout the year since they may be qualified for the medical cost deduction if they spend more than 7.5% of their adjusted gross income. For example, a taxpayer with a $50,000 income can deduct expenses in excess of $3,750.
“They need to take advantage of writing off their insurance premiums if they’re not pre-tax through an employer,” Dennis told me.
“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 informed me. “Even driving to and from the doctor you can take the mileage as a write off.”
Taxpayers who itemize their returns can deduct up to $10,000 in state and local taxes (SALT). Dennis advised taxpayers seeking the deduction to make sure they combine their income taxes, property taxes, and DMV costs.
Dennis advised individual taxpayers to “be mindful and realize that taxes are all year from January to December” and to consult with a tax professional earlier in the year to plan ahead.
She suggests 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 have saved them money when they file their tax returns.
Dennis said that taxpayers may benefit from pausing before filing their return once it is ready to be filed so that they can recall anything they may have forgotten and add it before filing, avoiding the need to modify their return.
