11 tax deductions and other ways to cut your 2017 tax bill

With all the talk about the new federal tax law that went into effect in January, it's easy to forget about the old o...

Posted: Mar 6, 2018 1:19 PM

With all the talk about the new federal tax law that went into effect in January, it's easy to forget about the old one.

But it's the old tax code that governs the deductions, credits and other measures you can use to save money on your 2017 tax return due in April.

In fact, it may be your last chance to use some of them since the new law eliminated many.

Here are 11 deductions and other tax-trimming measures you shouldn't overlook:

1. Traditional IRA contributions

You have until April 17 to make a tax-deductible contribution to a traditional IRA and have it count for 2017. The most you can contribute for the year is $5,500 ($6,500 if you're over 50).

How much of your contribution will be deductible depends on your income and whether you have a retirement plan at work.

2. Head of household filing status

If your spouse left you and your children, but you're still technically married, you may be able to file for head of household status.

It gives you a more generous standard deduction and other benefits than filing single or as a married person filing separately, which many people in this situation do, said Andrew Phillips, director of The Tax Institute at H&R Block.

To qualify, your spouse must have been gone for the last six months of 2017. You must have an underage child whose main home for more than half the year was your home and for whom you may claim an exemption.

In addition, you must have paid for more than half the household expenses for the year and file a tax return separate from your absent spouse.

3. Moving expenses

If you had to move long distance for work last year, you're allowed to deduct any moving-related expenses unreimbursed by your employer or if you're self-employed.

You don't have to itemize to take this deduction. But note, this is your last chance to take it for the next 8 years, since the new law eliminates it through 2025.

Related: Is your paycheck being taxed enough? Check the new IRS calculator

4. Mileage

If you drive for work you may deduct a portion of the miles you log, as long as you meet certain criteria and itemize your deductions.

You may not, for instance, deduct the miles you rack up commuting to and from work.

For Uber, Lyft and other car-service drivers, you can count both the miles driven with a passenger, as well as the miles driven between passengers, Phillips said.

The only catch: The mileage deduction counts toward your "miscellaneous" deductions. To claim them, all your miscellaneous deductions combined must exceed 2% of your adjusted gross income. And only the portion above the 2% threshold will be deductible.

This deduction, like all miscellaneous deductions, is eliminated under the new law. So you might want to negotiate reimbursement terms with your employer going forward, said Chris Hardy, an enrolled agent and certified financial planner with Paramount Tax and Accounting in Suwanee, Georgia.

5. Other job-related expenses

There are a host of other work-related expenses that may be deductible if you're a salaried or wage employee, so long as your employer hasn't reimbursed you for them.

These include license fees, legal fees related to doing or keeping your job, tools and supplies for work, dues paid to your union and any professional societies, and uniforms.

Like the mileage deduction, however, job-related expenses are grouped in with miscellaneous deductions subject to the 2% rule.

Other miscellaneous deductions include tax preparation fees, legal fees for tax advice, and hobby expenses but only up to the amount of income you made off your hobby.

6. Gambling losses

If you enjoy wagering, you're allowed to deduct your losses but only up to the amount of your winnings for the year, and only if you itemize.

Related: Tax law, bonuses and raises: 5 things you need to know

7. Personal property taxes

If you itemize your deductions and live in a state that imposes an annual personal property tax based on the value of your car, you may deduct that tax on your federal return, Phillips said.

The tax is usually part of your yearly registration fee. Some of that fee may be based on the weight of your vehicle, but only the portion of the fee based on the value of your car is deductible, according to the IRS.

Going forward, you may still take this deduction, but it will be subject to a new $10,000 cap on all state and local tax deductions, which include income and property tax deductions.

8. Medical expenses

You can take this deduction if you itemize, and the new tax law made it a little easier to take, temporarily.

The general rule is that you may deduct any unreimbursed medical and dental expenses that exceed 10% of your adjusted gross income. But that threshold is lowered to 7.5% of AGI for tax years 2017 and 2018 only.

9. Reinvested dividends

If you sold a long-held stock or mutual fund in 2017, you'll owe tax on any capital gain, which is the difference between your purchase price (aka your "cost basis") and the price you sold the investment for.

But if you've been reinvesting your dividends all along, that money gets added to your cost basis, Hardy said.

And that will reduce the overall tax you owe on your capital gains.

10. Private mortgage insurance premiums

If you itemize deductions, you're allowed to deduct the PMI payments you made last year on loans taken out after 2006.

You only have to pay PMI if you put down less than 20% on the home you bought.

You can't take the deduction if your AGI is over $110,000.

This break had expired but was given a one-year extension under a recent spending deal passed by Congress.

11. Home equity interest

If you've taken out a home equity loan or line of credit, you may still deduct the interest you pay on it for 2017.

But per guidance from the IRS, from 2018 through 2025, you will only be able to deduct the interest if you use the money for home improvement.

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