4 overlooked tax deductions that could save you big money – Motley Fool

The tax season is over us again and with it comes a variety of deductions that can save you money and pump up any refund you can get from the Internal Revenue Service. US tax filers claim, on average, just over $ 5,000 each in deductions each year, according to the Tax Policy Center. But tax experts say we put money on the table because there are many common deductions that people are unable to claim.

Here are four tax deductions you should be aware of when submitting your return this spring.

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1[ads1]. Student loans

Student loans can be a significant expense for families. The good news is that you can claim up to $ 2,500 in interest paid on eligible student loans for a university, college, or vocational education. This deduction is available to you if you pay interest on a student loan for yourself, your spouse or a dependent child.

To claim this deduction, you must be legal to repay the loan and pay it. In cases where a student and their parents are both legally obliged to repay a loan, the deduction shall be claimed by the person making the payment. Student Loan Rates are an "over the line" deduction that you can claim without specifying, as it is placed in the corrected gross revenue portion of Form 1040. Remember that the $ 2,500 you can withdraw is gradually phased out as your income grows when you are out of school . The phasing out begins when you start earning $ 60,000 as an individual or $ 125,000 as a married couple archives jointly.

2. Mortgages

Millions of Americans have mortgages, but relatively few choose to deduct their interest payments from their taxable income. And many have a good reason not to: This tax break requires you to specify your deductions, which prevent you from claiming a standard deduction. And since the last tax reform almost doubled the standard deduction, most taxpayers are better off claiming that instead of specifying.

But if you have a big mortgage and other big expenses that you can deduct from "under the line", consider taking this tax break. Mortgages are tax deductible if the home loan is for your primary residence or another home you do not rent. Your home must also serve as security for your home loan, so if you are unable to pay, the bank can abolish you.

If you have refinanced your home loan and paid "points", you can deduct we will. Points are mainly prepaid interest on a mortgage; People pay them up front to get a lower interest rate during the loan deduction period. A point is usually 1% of the loan amount. Points paid as part of a mortgage refinancing must usually be deducted from the loan's life, rather than all at once. For example, if you refinance to a 10-year mortgage, you will deduct some of the points each year during the 10-year loan.

3. Social security tax paid by self-employed person

If you are self-employed, you are entitled to a deduction for part of the social security tax you pay. Every employee must pay social security fees, and if you are self-employed, you must make these payments yourself, since you do not have an employer to do it for you. For 2018, employees and employers each paid 6.2% social security tax of up to $ 128,400 of employee earnings. However, if you were self-employed, you had to pay both the employer and employee's share, which accounts for 12.4% of up to $ 128,400 of revenue.

Fortunately, you can deduct a portion of this amount when you deposit your tax return. You can claim 50% of what you pay in your own tax as a tax deduction. A $ 2,000 self-paid tax payment, for example, reduces your taxable income by $ 1,000. If you are in the 25% tax bracket, you will probably save $ 250 in income tax. This deduction is a revenue liability adjustment on Form 1040, and is available if you specify your deductions or not.