Don't Miss Out! Maximize Your Refund with These Overlooked Credits and Deductions

October 30, 2024 by Kristin

Every tax season, an estimated billions of dollars in tax credits and deductions go unclaimed, with as much as $7.6 billion from the Earned Income Tax Credit alone in 2020¹. Are you one of them? Luckily, FileYourTaxes.com is here to help you prepare for this upcoming refund season. Below are the commonly overlooked credits and deductions that you could be missing out on:

Charitable Contributions for the 2024 Tax Year (Filed in 2025)

Giving back can be more than just rewarding—it can reduce your tax liability too. For the 2024 tax year, making charitable donations can offer significant tax deductions, whether you're donating cash, goods, or services. Here's how you can maximize your charitable impact and tax benefits:

1. Cash Donations

When you donate cash to a qualified charitable organization, you can deduct up to 60% of your adjusted gross income (AGI). If your contributions exceed that limit, you can carry forward the excess to future years for up to five years. Always keep receipts or bank statements for your records and ensure the charity is IRS-qualified.

2. Non-Cash Donations

Items like clothing, household goods, or vehicles are deductible based on their fair market value, provided they are in good condition. Donations worth more than $500 will require Form 8283, and contributions exceeding $5,000 may need an appraisal. Be sure to keep your documentation!

3. Volunteer Expenses

Though your time isn't deductible, the expenses you incur while volunteering can be. This includes mileage (currently $0.14 per mile for 2024) or any supplies you purchase for the organization.

4. Qualified Charitable Distributions (QCDs)

If you're 70½ or older, you can make QCDs directly from your IRA to a qualified charity. These distributions, up to $100,000 per year, count toward your required minimum distribution (RMD) and are excluded from taxable income.

5. Standard Deduction vs. Itemizing

If you're planning to itemize your deductions, charitable contributions can help reduce your taxable income. Make sure to tally all your deductions to determine whether itemizing will provide greater tax savings than the standard deduction.

Action Step:

Save all receipts and ensure the charity you donate to is on the IRS's list of qualified organizations. To make the most of your giving, check out the IRS page on Charitable Contribution Deductions.

Home Improvements and Tax Credits for 2024 Returns

Certain home improvements can make your home more energy-efficient and qualify you for tax credits in 2024. Here's what you need to know:

Energy Efficient Home Improvement Credit

This credit provides up to $1,200 annually for qualified home improvements like windows, doors, insulation, and HVAC systems. For example:

Windows can qualify for up to $600.
Doors for up to $250 each (capped at $500).
Heat pumps up to $2,000.
All improvements must meet Energy Star standards.

Residential Clean Energy Credit

This credit covers 30% of the cost of clean energy installations, like solar panels or geothermal heat pumps. There's no lifetime cap, and you can claim the credit annually through 2032.

Action Step:

Keep receipts and check the eligibility of your improvements against the latest IRS standards. For more information, visit the IRS pages on Energy Efficient Home Improvement Credits and Residential Clean Energy Credits.

Retirement Contributions

Maximizing your retirement savings doesn't just secure your future—it can also reduce your tax burden. For the 2024 tax year, here's how different retirement contributions can help:

1. Traditional IRA Contributions

you can contribute up to $7,000 ($8,000 if you're 50 or older), with potential tax-deductible benefits based on your income and filing status. Your contributions reduce your taxable income, and your earnings grow tax-deferred until withdrawal.

2. Roth IRA Contributions

While Roth IRA contributions aren't deductible, any qualified withdrawals are tax-free in retirement. The contribution limits are the same as for traditional IRAs.

3. 401(k) Contributions

For 2024, you can contribute up to $23,000 (or $30,000 if you're 50 or older) to your 401(k), pre-tax, lowering your taxable income for the year.

4. Self-Employed Retirement Plans (SEP IRAs, Solo 401(k)s)

Self-employed individuals can contribute up to 25% of their net self-employment earnings (capped at $66,000) to a SEP IRA.

5. Saver's Credit

Eligible taxpayers can receive a credit of 10%, 20%, or 50% of the first $2,000 they contribute to a retirement account, depending on income levels.

Action Step:

Maximize your contributions before the year ends, and track limits to ensure you're fully utilizing your tax-saving opportunities. For more details, visit the IRS page on Retirement Contributions.

Home Office Deduction

For the 2024 tax year, if you are self-employed, you may qualify for a home office deduction:

1. Eligibility

You must use part of your home exclusively and regularly for business. The space must be your principal place of business or a location where you meet clients or customers regularly.

2. Expenses You Can Deduct

Direct Expenses: Costs directly related to your office (like repairs) are fully deductible. Indirect Expenses: A percentage of expenses like utilities or rent based on the square footage of your home office can be deducted. Simplified Option: Deduct $5 per square foot (up to 300 square feet) for a maximum deduction of $1,500.

3. Qualifications

If you work remotely and receive a W-2, you are not eligible for this deduction. This deduction is only available to business owners who report income on a Schedule C or to individuals who receive 1099 income.

Action Step:

Calculate the square footage of your home office and keep detailed receipts. Visit the IRS page on Home Office Deductions for more information.

Reference Page

For more detailed information and official guidelines, please refer to the following resources used to ensure accuracy for the 2024 tax year content:

1. Charitable Contributions
   IRS: Charitable Contribution Deductions
   (https://www.irs.gov/charities-non-profits/charitable-contributions) This page provides the official guidelines on deductions for both cash and non-cash donations, including limits and required documentation.
2. Non-Cash Donations (Form 8283)
   IRS: About Form 8283 (https://www.irs.gov/forms-pubs/about-form-8283)
   This page explains when and how to file Form 8283 for non-cash donations exceeding $500.
3. Mileage Rates for Volunteer Work
   IRS: Standard Mileage Rates
   (https://www.irs.gov/newsroom/irs-issues-standard-mileage-rates-for-2024) This page outlines the mileage rate for charitable contributions, which is $0.14 per mile for 2024.
4. Qualified Charitable Distributions (QCDs)
   IRS: Qualified Charitable Distributions
   (https://www.irs.gov/newsroom/important-charitable-giving-reminders-for-taxpayers#:~:te xt=Taxpayers%20age%2070%20%C2%BD%20or,directly%20to%20a%20charitable%20 organization.) This page details how individuals aged 70½ and older can make tax-exempt distributions from their IRAs directly to charity.
5. Energy Efficient Home Improvement Credit
   IRS: Energy Efficient Home Improvement Credit
   (https://www.irs.gov/credits-deductions/energy-efficient-home-improvement-credit) This resource outlines the types of home improvements that qualify for the credit, including windows, doors, insulation, and HVAC systems.
6. Residential Clean Energy Credit
   IRS: Residential Clean Energy Credit
   (https://www.irs.gov/credits-deductions/residential-clean-energy-credit) Learn about the 30% credit for the cost of installing clean energy systems, such as solar panels and geothermal heat pumps.
7. Retirement Contributions (IRA and 401(k) Limits)
   IRS: IRA Contribution Limits
   (https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-con tribution-limits) This page provides information on the contribution limits for both traditional and Roth IRAs.
8. Saver's Credit
   IRS: Saver's Credit
   (https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-savings-contri butions-credit-savers-credit) Detailed information on the Saver's Credit for low- and moderate-income taxpayers who contribute to retirement plans.
9. HomeOffice Deduction
   IRS: Home Office Deduction
   (https://www.irs.gov/businesses/small-businesses-self-employed/simplified-option-for-ho me-office-deduction) This resource explains eligibility and deduction options for individuals who use part of their home exclusively for business purposes.

Important Disclaimer: The information provided in this blog is for general informational purposes only and is not intended as tax, legal, or financial advice. Individual tax situations vary, and not all taxpayers will qualify for the deductions or credits discussed, such as the charitable contribution deduction or others that may impact your refund. Please consult with a qualified tax professional to assess your unique tax situation before making any decisions or filing your tax return.