We’re starting here because so many of our clients are remote workers or employees who work from home. Surely the use of your home creates a deduction for your taxes, right!?

Not since 2018, no.

Under the Tax Cuts and Jobs Act of 2017 (TCJA), employees are no longer able to deduct expenses they may have been able to itemize before. This includes, but is not limited to, the business use of their home, Union dues paid, and other unreimbursed out of pocket expenses.

If you work from home, your employer may reimburse you for the use of your home office. And that reimbursement may be a tax free fringe benefit. So, while not an active deduction, this reimbursement won’t increase your taxable income.

Speak with your employer to request this benefit.

 It can You may be able to deduct certain medical expenses on your Schedule A – Itemized Deductions.

Medical expenses include doctors visits, co-pays, prescriptions, medical devices, and more. In order to be deductible, they have to be unreimbursed – that is, the expense has to be paid for by you and not from a Flex Savings account (FSA), Health Savings Account (HSA), by your insurance company, by your employer, or directly by someone else.

There is some math that has to happen before we can determine if your medical expenses are deductible. This math is tax math, and while the arithmetic is easy, understanding which numbers go into that mix is harder.

1. We have to know your Adjusted Gross Income (AGI). This includes the wages your employer paid you, your net income from business Activity, interest income, dividend income, net capital gains (or losses), income from Crypto Activity, Gambling winnings, and more. Your deductible Medical Expenses are limited to 7.5% of this magic number.
2. We need to know your total out of pocket medical expenses. These are medical expenses before you reach your deductible, that insurance doesn’t cover, and that aren’t paid out of an HSA or FSA. It can include any post-tax, out of pocket health insurance you pay for and that isn’t deducted elsewhere.

When we request your medical expenses, we ask for the total of all expenses so we can calculate the most advantageous position for you. Some of our clients prefer to wait until we have an approximate AGI and thus a starting point for the deductibility of medical expenses.

As a policy, we don’t provide you with this number until we have enough information to calculate it. Some clients may prefer to use their prior year AGI as a guidepost, especially if their income hasn’t changed significantly.

Educational and related expenses really could be its own post in and of itself. But that’s not happening today, so let’s keep it a little bit breif right here, shall we?

Most edcuational expenses don’t create a deduction but a credit. This isn’t always the case, especially for certain state related items. In certain states, education related expenses that aren’t taxable for federal purposes create taxable income for state purposes.

Expenses for Children in K-12

Certain kinds of, “tuition,” are actually daycare costs and may be used toward the childcare credit.

Private school tuition is not applicable. Neither are the fees paid related to field trips or extra cirricular activities through your child’s school. These expenses may be able to be paid through the funds in a 529 plan. While not taxable for federal purposes, Oregon and several other states will tax the income and any previously received tax benefit on any 529 plan funds used to pay for K-12 expenses.

I (or my spouse) went back to school. We get a tax benefit, right!?

Maybe. That will depend on what year of school you’re in as well as your Adjusted Gross Income (AGI). Much like with medical expenses, we don’t guesstimate this until we know. Tax planning and projections are the best way to know if you can take advantage of these credits prior to the completion of your tax return.

If you own a business and you’re obtaining a higher or different degree (Master’s, Doctorate, etc), this is usually where you’ll see your own tax benefit. It’s rarely a business deduction. We’ll ask some questions to be certain though.

My adult child attended college. What’s next?

You may be eligible to receive an education credit. There are two of these available, and we’ll need to know some information in order to determine what credit is applicable and how much. This includes, but isn’t limited to, your AGI (calculated during tax return preparation), tuition, scholarships, if tuition was paid for from a college savings plan, and the number of years your child has attended college or university.

It’s all education, right!? So where’s the tax deduction!?.

Much like with office expenses, the answer will change if you’re an employee versus if you own a business (are a freelancer, gig worker, self-employed, etc).

Under the Tax Cuts and Jobs Act of 2017 (TCJA), employee business expenses disappear. If you pay for continuting education, professional development, or similar, you’ll generally need to request reimbursement from your employer to be made whole.

Even better, work with your employer to have them pay for the education directly.