Taxes are my bread and butter. While most people detest taxes, I LIVE FOR TAX SEASON.
Here are some informative tax deductions to help you decrease your taxes!
A tax deduction reduces your Adjusted Gross Income or AGI on your income tax return, thus either increases your tax refund or reduces your taxes. It's not just about how much income you make but how much you get to keep of your own pie.
Your Income Tax Return Deductions
What is a Tax Deduction?
Tax Deductions reduce your Adjusted Gross Income or AGI and thus your Taxable Income on your Income Tax Return. As a result your overall Taxes reduce: your Tax Refund will increase; Taxes you owe decrease or you might be tax balanced - no Refund or owed Taxes.
Deduction Expense Claim Period
Generally, eligible Tax Deduction Expenses have to occur during the given Tax Year: Jan. 1 - Dec. 31 so you can claim them on your Tax Return. The exception to this can be retirement or health plan contributions, which can be made during a time frame in the following calendar of the given Tax Year; usually not beyond the Tax Return Due Date.
These are deduction methods on how you apply deductions on your Tax Return Form. Your tax preparer will determine which is most tax advantageous to you, whether to itemize or use standard deductions on your return.
The Single or Head of Household (HOH) Filing Status on your Tax Return has an indirect impact on the standardized deduction amount you will be eligible for. You do not have to worry about the amount as it will be applied based on your Filing Status when you prepare and eFile your Taxes. Thus, make sure and check if you might qualify as Head of Household as a single person.
Claim one or more Dependents on your Tax Return by entering the amount of Dependents you wish to claim. It's for you to determine whether a person is indeed a qualifying Dependent in the eyes of the IRS. If a person does not qualify as a Dependent they might qualify as a Qualifying Relative.
As mentioned earlier, you might be able to claim a person as a Qualifying Dependent or Relative.
Marriage, Divorce, Children, Job Changes, Death, Home Purchase or Sale, etc. are all life changing events that can have implications on your Tax Return Filing Status and eligible tax deductions.
The Mortgage Interest Deduction as reported to you on Form 1098 Line 1 can be claimed as a deductible expense on your tax return. Beginning in Tax Year 2018 the amounts of qualified residence debt or loan amounts changed. As a mortgage owner you can also deduct points paid on the purchase of real property. Points are referred to interest paid in advance or simply pre-paid interest made on a home loan to improve the rate on the mortgage offered by the lending institution.
You can deduct State And Local real estate and personal property Taxes (SALT), as well as either state and local income taxes or general sales taxes up to $10,000. Technically, the itemized method is required to claim SALT. However, it might not be in your best interest if the new standardized deduction amount exceeds that of the itemized amount.
Are you working from home as self employed or independent contractor with 1099 type income? Then some expenses will be applicable.
There are no direct expense deductions for energy efficient home improvements but there are Tax Credits.
Long Term Care insurance premium and Long Term care cost deduction
As of Jan. 1, 2019, you can only deduct the amount of the total un-reimbursed allowable medical care expenses for the 2019 tax year that exceeds 7.5% of your adjusted gross income. The 7.5% of adjusted gross income amount is expected to stay the same for 2020 returns. If this changes, we will update this page. To illustrate this, let's say your AGI is $40,000 and your medical expenses are $5,000. You could claim $40,000 * 7.5% = $3,000. As $2,000 of the $5,000 exceeds the 7.5% you can deduct $2,000 for tax year 2019. For 2018 the limit was 7.5% or $40,000 * 7.5% = $3,000 or $2,000 in medical deductions. You can deduct medical expenses such medications, dental treatments, eye doctor visits, hospital fees and services.
Health Savings - HSA - , Flexible Spending - FSA - are Medical Savings Accounts (MSA) that can be used as options to deduct for medical expenses. A Health Reimbursement Arrangement - HRA - is an employer sponsored plan to reimburse for medical expenses.
Find out which charitable contributions and donations you can claim on your Tax Return as a deduction.
There are no direct child care expense deductions you can claim, however you should explore if you are eligible for the Child Care Tax Credit.
While not a deduction, the Adoption Credit is a tax credit designed to help with the expenses related to adopting a child under the age of 18 (including a child with special needs). When you start a free tax return on eFile.com, include your adoption expenses and the credit will automatically be calculated and reported for you by the tax app and applied to your tax return. Thus, no complicated math or guessing what is required by you.
Gain a comprehensive overview on the complex subject of Retirement Plans, maximum and minimum Retirement contributions, early or minimum withdrawals and how all these factors can impact your Taxes.
Student or Education related Tax Deductions and Student Tax Credits have changed since the latest Tax Reform in 2018. Education Savings Plans or 529 Plans can now be used for K-12 Student education as well. The Student Tuition and Fee Deduction expired at the end of 2017. Many types of educational assistance are tax free if they meet certain requirements. This is often referred to as tuition reduction and you don't have to include a qualified tuition reduction in your income on your tax return.
A general overview of employee related job expense deductions (e.g. travel).
For Car Mileage Expenses, Teacher, Educator related expenses, see further below.
Did you use your car for business, medical, or charitable purposes? One of the following requirements as an employee have to be meet:
- Qualified performing artist
- Fee-basis state or local government official
- Armed forces reservist
- Impairment-related work expenses
- Your employer entered code "L" for box 12 of your W-2
As a Teacher or Educator you can deduct certain job related expenses such as books, supplies, computer equipment, software or services, etc. on your Tax Return.
Find out what type of work qualifies as Self Employment or Independent Contractor. As such the Tax Return implications are different than those of a W-2 Wage earner. You can prepare and eFile your taxes with self employment or independent contractor income.
The Qualified Business Income deduction (or QBI deduction) allows you to deduct up to 20% of qualified business income for most self-employed taxpayers or small business owners.
You can deduct casualty and theft losses from a federally declared disaster area.
Interest you paid on money you borrowed for an investment property is generally deductible. This does not include interest from passive activities or securities that generate tax-exempt income.
All miscellaneous deductions subject to 2% of your AGI are eliminated for Tax Years 2018-2025. You will file the information for 2017 and earlier Tax Returns, as well as for 2026 and later Tax Returns.
The moving expense deduction was effectively suspended - due to the 2018 Tax Reform Act - starting with tax year 2018 until the 2026 tax year. However, if you are on Active Military Duty you can still deduct relocation expenses based on a military relocation order. Some states - like Massachusetts - still have the moving expense deduction for everybody. Tax Tip: If your employer asks you to move, you might want to ask for an expense reimbursement, however it would be taxable.
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