'AI, can I deduct that?' The top five overlooked tax deductions and how AI can help you find more.
Did you know you might be able to deduct a swimming pool, dead-beat friend debt, and cat food on your taxes? Those are just the start of some creative deductions you might be able to add to your 2022 tax return.
If you thought taxes were supposed to be less painful this year thanks to pandemic-era confusion going away, think again. We’re talking taxes, after all.
This year? Add inflation and take away stimulus payments. Add more quirky rules alongside adjusted tax brackets. Add rising costs for just about everything – food, gas, electricity – but take away most refund windfalls.
You know what all that adds up to? More anxious people feeling the need for a tax refund they aren’t likely to get.
That’s according to a recent Straight Talk Wireless survey of 2,000 people. The results show that 76% “need their tax return money more than ever,” and more than one in every three “see it as a necessity,” and aren’t sure how to make ends meet without it.
So, I set out on a deductions exploration to uncover ways to potentially ramp up returns using tech, starting with AI.
Is there an AI that can do taxes?
Let’s face it, regarding raw data, computers are more intelligent than we are. The recent launch of new consumer AI tools underscores the fact that the wealth of wisdom housed on connected clouds and hard drives around the globe is simply more than a human brain can handle.
But it doesn’t know you. When I asked ChatGPT what creative, out-of-the-box deductions I could report on my 2022 taxes, it listed charitable expenses, retirement account contributions, and job-related expenses. Then, it told me to consult a tax professional. These are basically the same answers I found across various consumer AI models and by Googling the same questions.
While ChatGPT is impressive turning general data around quickly, every answer ended the same way:
“It's important to note that tax laws and regulations can be complex, and deductions may vary based on the specific circumstances of your situation. If you have questions about deducting expenses on your tax return, it's recommended that you consult with a tax professional or use up-to-date tax software to ensure that you are following the rules and taking advantage of all available tax deductions.”
So, no, AI alone is a no-go.
How about AI + Tax Expert?
Several online tax tools already use AI in some capacity. For example, through Intuit’s platform, TurboTax Live uses a blend of sophisticated AI to virtually match-make a taxpayer with an expert in as little as 500 milliseconds during peak traffic. For reference, that’s about as long as it takes to blink.
With taxpayers' permission, it can also pull information from more than 24,000 institutions to find, collect, organize, and help document relevant data. The AI models are even trained to flag highly complex returns for an additional human expert review it might need. Throughout this process, around 50 interrelated machine-learning models are running at the same time.
“It’s amazing, to tell you the truth, [it] helps us pinpoint what’s important, troubleshoot, and the whole process is much faster,” CPA Neil Balanay tells me over Zoom.
Balanay’s been helping people with their taxes for more than 24 years, but as a manager and “live expert” with TurboTax, he says he can focus even more on people and their specific tax needs. “I’ve learned how to be a better listener. We want to make this whole process stress-free,” he added.
Maybe that’s why my question to him about the most overlooked and surprising deductions people might be able to claim generated such a prolific (and arguably awesome) response.
The top five most overlooked but often legitimate expenses include:
- state sales tax
- jury pay that was paid to an employer
- moving expenses
- pet moving expenses
- student loan interest
In certain circumstances, people can even deduct everything from summer camp to side gigs, beer to bitcoin and service dogs to swimming pools.
Still, Balanay says to be careful. Keep clear records and work with your accountant or tax professional to ensure you do everything right.
When I asked him what the craziest thing he ever helped someone deduct was. Turns out, it was breast augmentation surgery for someone who works as an exotic dancer! TurboTax posted about that and several others on its blog, including whaling ships, clarinet lessons, guard dogs, and getting in shape.
So, yes – a blend of AI with human expertise unearths all kinds of potential deductions!
Wiser ways to spend those refunds.
Technology upgrades come in second to debt repayment in that recent Straight Talk survey, which also explores how people plan to spend any money they might get back from good ole’ Uncle Sam this year.
When it comes to saving cash on gadgets, remember, many “budget” smartphones still start in the $500-$800 range, so be sure to shop for deals and look at all your options, including last year’s models and service providers that won’t spring a bunch of mystery and “gotcha” fees on you.
A good example is pairing a smartphone for less than $100 with an unlimited plan that offers talk, text, high-speed data, and 5GB of hotspot data on a decent network for less than $50 a month. (Those are examples from Straight Talk Wireless that I learned about when they sent the tax survey.)
Also, remember that you can claim up to $1,200 for the 2023 tax year if you install clean energy systems, including a set of smart blinds like the ones that made my top five gadgets of the year in 2022 (and will likely make it again this year), solar panels, and battery storage.
Jennifer Jolly is an Emmy Award-winning consumer tech columnist. The views and opinions expressed in this column are the author's and do not necessarily reflect those of USA TODAY.