When it comes to tax deductions, one of the most commonly overlooked is deducting interest expenses. I see this missed in both my real estate investor and medical professional clients, whether they are investing in rental properties, stock porfolios, and more. Many taxpayers miss this opportunity simply because they don’t realize they qualify. In this post, I’ll explain what qualifies, common mistakes, and how you can ensure you’re not leaving money on the table.
Video Transcript: Are you missing this tax deduction? Deducting interest expenses
Childcare expenses are another example of deductions that may be available that can add a fair bit to your tax return.
Often people are thinking of babysitting expenses, camps, daycare, but also think for some people a portion of private school fees or maybe the cost of a nanny.
There are various limits and rules that apply to the childcare expenses. A couple of the critical ones:
You’re only allowed to deduct 2/3 of the cost. There are various limits based on the age of the kids and whether or not there’s a disability.
One of the gotchas tends to be it has to be claimed by the spouse with the lower income, and they have to have what we call earned income. So if the lower-income spouse, for example, has all dividends, they’re not going to receive a childcare expense. In other words, that childcare expense for the year has been wasted.
Sometimes it still makes sense, but not usually.
So the real critical idea with childcare expenses is to make sure the childcare expenses are going to the taxpayer you’re expecting them to, and you’ve totaled up and have a good idea of what those expenses are, the income required to make the maximum deductions.
I’m George Dube, saving the world from tax, one bow tie at a time®.
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Resources
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Remember – circumstances are unique! This information is summary in nature. Seek out advice from your tax advisor about your specific situation.
