Top 19 Tax Deductions Nurses Can Take + Free Tax Cheat Sheet
As we approach the due date for filing our 2022 taxes, many of us are looking for and interested in getting the highest return possible. That means finding any and all tax deductions & tax credits we can take in order to reduce our tax burden.
Unfortunately, for a lot of us (including caregivers)– tax breaks have returned to pre-pandemic levels. Some of the things nurses were able to deduct in 2022, they may not be able to deduct in 2023.
Knowing what deductions and credits to claim can be confusing. So we’ve created this list of top deductions & credits (you may not be aware of ) that can lower your tax burden for 2022.
Before we Begin: We must call out that the following is a list of itemized deductions. You would only want to itemize your deductions & credits if you believe they will be higher than the standard deduction.
Many of us will have a bigger tax break utilizing the standard deduction. The 2022 standard deduction is $12,950 for single filers, $25,900 for joint filers or $19,400 for heads of household.
The only way to know if you should do standardized or itemized deductions – is to sit down and do the math. Or – you know – hire a tax professional and save yourself the headache.
In fact – this is a good time to mention: WE ARE NOT TAX PROFESSINALS.
Excuse the all caps. This is simply a guide to make you aware of certain tax breaks. It is always best to seek out a professional when seeking counsel on how to complete your taxes
Pro-Tip: Find a tax professional that has experience with your situation. For example: if you’re a 1099 nurse, and work as a contractor – find a tax professional that specializes in nurses who work as 1099 contractors.
Alimony Payments: If you’re divorce occurred before 2018, you can deduct your alimony payments from your gross income.
American Opportunity Tax Credit (AOTC): If you earned less than $90K (for single filers) you can claim up to $2,500 for any qualifying educational expenses you incurred (such as tuition, books, and supplies). The AOTC would only apply if these expenses applied to your first four years of higher education.
You can also claim the Lifetime Learning Credit (LLC) (up to $2,000) if you spent a minimum of $10K on higher education.
You can claim both the AOTC and LLC: but not for the same student or the same expenses.
Charitable Contributions: Not something that’s going to tip the scales – but every little bit counts when you’re adding up itemized deductions. For the 2022 tax year, you can deduct up to $300 in charitable contributions (up to $600 for joint filers).
Childcare & Dependent Care Deduction: If you paid for child or dependent care in 2022 in order to work, look for work or go to school, you may qualify for a $4,000 credit for the 1st dependent and an $8,000 credit for two or more dependents.
Child Tax Credit (CTC): Many of us saw a glorious hike ($3,600 per child) in 2021 for the CTC. In 2022 – those glorious days are gone. You can now only deduct $2,000 per dependent.
Energy Efficient Credit: Did you purchase or install any type of renewable energy in your home in 2022? (e.g. solar panels). You may qualify for the residential energy efficient property credit.
A similar tax credit is also available for the purchase of plug-in electric vehicles and can be as a high as $7,500.
Early Withdrawal Penalties: If you paid any penalties associated with withdrawing money early from a CD (certificate of deposit) you can deduct those penalties.
Earned Income Tax Credit: Did you earn less than $59,187 in 2022? You may qualify for the earned income tax credit which has a value of $560 to $6,935 depending on how many children you have.
Federally Declared Disaster: If you lost property due to a federally declared disaster (whether that property was a total loss, or just damages) you may qualify to deduct the value of that property on your 2022 taxes.
Gambling Loss Deduction: If you had major losses due to gambling, you may qualify to deduct these losses from your gross income. Keep in mind, you will also need to report any winnings as income.
Investment Deduction: If you took out a loan to purchase an investment property – you may be able to deduct the interest you paid on that loan.
IRA Deduction: If you contributed to an IRA with money you already paid income tax on, you can get a reduction on the amount of tax you paid on that income. The same goes for HSA (Health Savings Account) contributions.
Medical Expense Deduction: If your 2022 medical expenses exceeded 7.3% of your gross income, you may be able to deduct them.
Mileage Deduction: Did you have to drive a lot for work in 2022 and your employer didn’t reimburse you for mileage? You may be able to deduct between 58.5 and 62.5 cents per mile.
Mortgage Interest Deduction: If you have a mortgage, you may be able to deduct the interest on those mortgage payments.
Salt Deduction: Known as the state and local tax deduction, you may be able to deduct your local property tax payments.
Self-Employment Tax Deduction: If you spent 2022 working as an independent contractor (such as a travel nurse) you will be subject to a self-employment tax of 15.3%. But you can deduct one half that on your federal tax return. As a self-employed individual, you can also deduct your retirement contributions and health insurance premiums.
Social Security Credit: If you worked for multiple employers in 2023, and they each withheld social security, you may have paid too much. Overall, employers are only supposed to withhold 6.2% of your income for social security tax. If you paid more, you’ll likely qualify for the credit for excess social security.
Student Loan Interest Deduction: If you paid (or are paying) for your education through student loans, or credit cards you can now deduct up to $2,500 of student loan interest incurred. If you earn over $70K a year, this deduction will be reduced.
Did we miss any? There are hundreds of various tax situations and it’s no wonder people go to school for years to become tax professionals – this stuff is beyond complicated and what we’ve talked about here is by no means a complete list of all tax breaks and credits known to man. We highly recommend reaching out and hiring a tax professional – who will take the time to learn about your specific situation and figure out how to lower your tax burden.