As tax filing time approaches, many of us find ourselves in the position of attempting to determine which deductions are appropriate to take for our personal financial situation. By working with a tax professional, such as L. James & Associates in Denver, CO, you can determine the appropriate deductions for you. Below is information about the various options for the two ways to use deductions.
This particular deduction is determined solely by filing status. Single filers will get a $6,300 deduction in 2015, which is an increase over last year’s deduction. Joint filers have also seen their standard deduction increased for 2015 to $12,600. If you are the head of the household, then their deduction has been increased to $9,250. Still, there are various aspects depending on your status as a taxpayer, including age or potential disability.
For those who are claimed as dependents on another taxpayer’s return, there are some additional considerations. If they earned income, you want to add that up and then add an additional $350. That total may be higher than the deduction of $1,050, so then the income plus $350 should be taken as the deduction.
When should you just take the standard deductions? Typically, this is when the itemized deductions are not greater than the standard deduction. Working with your tax professional or accountant, you can determine which choice works best for your filing situation.
When it comes to itemizing your deductions, you can take advantage of the Schedule A to determine if you will receive a higher deduction for itemizing. Working with your tax professional you can determine what you are eligible to itemize. Below are a few of the items most individuals itemize on their Schedule A.
Then there are itemized expenses that must reach over 2% of your AGI to be eligible for deduction. A few of these items are listed below:
Deductions also are classified based on what is not subject to the 2% rule. These are essentially guaranteed tax savings, because you can take advantage of them even in smaller amounts. Here are just a few of these deductions:
Amortization bond premium – The amount you pay over face value of taxable bonds because they are paying higher than current market interest rates. However, determine what type of bonds you own, because tax-exempt bonds are not eligible for the deduction.
Gambling losses – The only thing to keep in mind is that this deduction cannot exceed the gambling winnings that you reported in income. For example, if you only win $300 but have lost $1,000, you can only claim $300 in losses.
Federal Estate Tax on Income in Respect of a Decedent – This deduction has come into play as taxpayers inherit money from IRA or company retirement plans. The taxes for this income are not included on the decedent’s final tax return, but the beneficiary is taxed on the income. Working with your tax professional, you can determine what you can claim as a deduction. In addition, this deduction can also cover an estate that paid federal taxes. Essentially, if the estate paid federal taxes on an IRA, as you draw the money out, you can take the deduction for those taxes previously paid.
The most important thing to remember about these deductions is that they are available, but you have to know the rules to take advantage of them. By choosing to work with a tax professional or accountant, you are able access their knowledge to make sure that you are not missing out on available deductions.
Call or click on the link below to contact one of the tax professionals at L. James & Associates in Denver, CO, who can work with you to maximize your deductions to reduce the tax liability on your return.
