10 Tax Deductions You Shouldn't Miss

Tax season can be stressful, but knowing which deductions you qualify for can significantly reduce your tax burden and potentially increase your refund. Many taxpayers miss out on valuable deductions simply because they're unaware of them or don't understand the requirements.

At AM Professional Services, Somerset NJ's trusted CPA firm, we've compiled a list of 10 commonly overlooked tax deductions in Somerset NJ that could save you thousands of dollars. While every taxpayer's situation is unique, this guide will help you identify potential deductions you may have missed in previous years.

1. Home Office Deduction

If you use part of your home exclusively for business purposes, you may qualify for the home office deduction in Somerset NJ. This applies whether you're self-employed or an employee who works from home. You can deduct expenses related to the business use of your home, including:

• A portion of your mortgage interest or rent
• Utilities (electricity, internet, water, etc.)
• Property taxes
• Home insurance
• Home repairs and maintenance

The IRS offers two methods for calculating this deduction: the standard method (based on actual expenses) or the simplified method (a standard deduction based on square footage). Our Somerset NJ CPA professionals can help you determine which method is most advantageous for your situation.

2. Health Insurance Premiums

Self-employed individuals in Somerset NJ can deduct 100% of their health insurance premiums, including coverage for themselves, their spouse, and dependents. This is an "above-the-line" deduction, meaning it reduces your adjusted gross income (AGI) even if you don't itemize deductions.

Additionally, if you itemize deductions, you may be able to deduct medical and dental expenses that exceed 7.5% of your AGI, including:

• Prescription medications
• Medical and dental treatments
• Medical equipment and supplies
• Transportation costs for medical care

3. State and Local Tax Deductions

New Jersey taxpayers can deduct up to $10,000 ($5,000 if married filing separately) in combined state and local income taxes, property taxes, and either sales or income taxes. While this deduction is capped, it's still significant for many taxpayers, especially homeowners in Somerset County with high property taxes.

4. Charitable Contributions

Donations to qualified charitable organizations are deductible if you itemize. This includes:

• Cash donations
• Donated property or goods
• Mileage driven for charitable purposes (14 cents per mile)
• Out-of-pocket expenses while volunteering

Always keep receipts and documentation for your charitable contributions. For donations over $250, you'll need written acknowledgment from the organization.

5. Student Loan Interest

You can deduct up to $2,500 in student loan interest paid during the year, depending on your income. This is another "above-the-line" deduction that reduces your AGI even if you don't itemize. The deduction phases out for higher income earners, but many taxpayers with educational debt can benefit from this deduction.

6. Retirement Plan Contributions

Contributions to traditional IRAs, 401(k)s, and other qualified retirement plans are often tax-deductible. For 2025, you can contribute up to:

• $6,500 to an IRA ($7,500 if you're 50 or older)
• $22,500 to a 401(k) or 403(b) ($30,000 if you're 50 or older)
• $15,500 to a SIMPLE IRA ($19,000 if you're 50 or older)

These increased limits provide opportunities to save more for retirement on a tax-advantaged basis while reducing your current tax liability.

7. Mortgage Interest

Somerset NJ homeowners can deduct interest paid on mortgage debt up to $750,000 ($375,000 if married filing separately). This deduction is available for primary residences and one secondary home. Additionally, points paid when obtaining a mortgage may be deductible in the year paid or over the life of the loan.

8. Child and Dependent Care Credit

If you pay for childcare or care for a dependent adult while you work or look for work, you may qualify for this credit. For 2025, the credit is worth up to 35% of qualifying expenses, depending on your income. Maximum expenses that can be claimed are:

• $3,000 for one qualifying individual
• $6,000 for two or more qualifying individuals

Unlike a deduction, a credit directly reduces your tax liability dollar-for-dollar, making this a valuable benefit for many Somerset NJ families.

9. Self-Employment Deductions

Self-employed individuals and small business owners in Somerset NJ can deduct a variety of business expenses, including:

• Business travel, meals, and lodging
• Vehicle expenses related to business use
• Office supplies and equipment
• Professional services and subscriptions
• Business insurance premiums
• Advertising and marketing costs

Additionally, self-employed individuals can deduct the employer portion of self-employment taxes (7.65% of net earnings), further reducing their tax burden.

10. Education Credits and Deductions

There are several education-related tax benefits available to Somerset NJ residents, including:

• American Opportunity Credit: Up to $2,500 per eligible student for the first four years of higher education
• Lifetime Learning Credit: Up to $2,000 per tax return for qualified education expenses
• Tuition and Fees Deduction: Up to $4,000, depending on income

These benefits can help offset the cost of education for you, your spouse, or your dependents.

Expert Tax Planning in Somerset NJ

Tax deductions can significantly reduce your tax liability, but they're only beneficial if you claim them. Many taxpayers miss out on potential savings because they're unaware of available deductions or don't have the proper documentation.

Working with a professional tax preparer from AM Professional Services in Somerset NJ can help ensure you're claiming all the deductions you're entitled to. Our experienced team stays current with tax law changes and can identify deductions specific to your situation, potentially saving you thousands of dollars.

Maximize Your Tax Savings with Professional Help

Understanding and claiming all available tax deductions in Somerset NJ is crucial for minimizing your tax liability. From home office deductions to retirement contributions, these strategies can result in significant savings for individuals and businesses alike.

Remember that tax laws change frequently, and strategies that worked in previous years may need adjustment. Regular consultations with a professional CPA in Somerset NJ ensure your tax planning remains optimized for current regulations and your evolving financial needs.

"The hardest thing in the world to understand is the income tax."

Even Einstein found taxes confusing! Don't hesitate to seek professional assistance with your tax preparation in Somerset NJ to ensure you're maximizing your deductions and minimizing your tax liability.