There are several things to take into consideration when filing your taxes, one of the many being tax deductions. If you need help deciding whether to go with the standardized deduction instead of itemized deductions, we here at Tax Problem Resolutions, Inc. would love to help you out. The difference between the standard deduction and itemized is pretty big. Please keep reading but we strongly recommend scheduling an appointment with us to talk about which option will fully maximize your tax savings.
If you decide to utilize the standardized tax deduction, you’re options are pretty straightforward. Based on what filing status you choose, the IRS grants you this set monetary amount to subtract from your taxable income, therefore making that deduction tax exempt. If you plan on filing single, or married filing separately that amount is $6,300, married filing jointly or a qualifying widow or widower can claim $12,600, and if you plan on filing head of household that’s a $9,250 deduction. Speaking with an accountant if you don’t already have one might clear up whether or not this is the right deduction choice for you.
The other option you have is the itemized deductions option for your federal tax return. If you have numerous personal or self-employment expenses you’ve paid out of pocket over the course of the last tax year, you might want to find a tax professional for what you can deduct on your taxes. They’ll be able to help you identify what is a reasonable and qualifying deduction, and what you won’t be able to include. The itemized deduction option comes with a long list of separate costs you’re allowed to deduct. Below is a list of just a few things you might be able to deduct when you itemize your deduction.
Mortgage Interest and Insurance – This one is one of the bigger and most common deductions for people who choose to itemize their deductions. Your mortgage company will most likely issue you a form 1098, which will include all pertinent information you need in order to itemize these expenses when you file your tax return. Mortgage insurance, mortgage interest, and if you happen to have purchased your home during the tax year are all items you can deduct on that form too. Unfortunately not everyone’s mortgage company will issue you a 1098, so you might end up doing the math yourself. This is another one of those complicated issues that can be made easy by utilizing the services of a tax preparer to ensure the numbers add up correctly.
Charitable Deductions – When giving away goods, money or services, you’ll first need to make sure the charity or organization you’re donating to is qualified and recognized by the IRS. The IRS has very strict rules surrounding just who can receive tax exempt donations. If you’ve been handing over your valued time or have donated a substantial amount with the idea you’ll be able to deduct that, you might want to double check your organization’s standing with the IRS. Political parties, campaigns and candidates do not count as a recognized charity. The money you donate to them is strictly because you like them, and you won’t benefit on your tax return by helping out their cause. Another thing to remember when donating to charities, is that your donation only counts in the year it’s given, so you have to have written the check by December 31st for it to count in that year of taxation. Also, pledges don’t count. Merely saying you’re going to donate doesn’t actually mean the money you plan to give away is deductible.
Dental and Medical Expenses – If you found yourself in unfortunate health situations that required a lot of out of pocket healthcare expenses, you may be able to deduct those on your federal return. There are some pretty stiff stipulations though, so you might want to find a tax preparer to put things together for you. They’ll know exactly what matters, and what you won’t be able to use. Most costs involved in the diagnosis and treatment of illness, as well as the ongoing treatment to keep you in health are eligible for deduction. There is a percentage of your AGI (adjusted gross income) that you’ll need to spend out of pocket though, before you’re allowed to claim those expenses.
State and Local Income Taxes – If you ended up paying on your state taxes last year, you’ll be able to deduct those from your taxable income. The big thing to keep an eye on however, is whether or not you were required to pay federal taxes on that income. If not, you can’t deduct that expense.
Job Search Costs – If you aren’t self-employed and you found yourself on any sort of hunt for a new employment opportunity, you’d be surprised at how many of the expenses related to that venture are deductible. Cab fare or gas money you used to get from interview to interview, the cost to get yourself some updated business cards and if you hired someone to redo your resume and print it out, are all little things that can add up quick. To maximize the savings you’ll get on your return, make sure you keep your receipts to make it easy to add up your costs when the time comes.
Self-employment Expenses - This one is huge for small business owners or entrepreneurs. From office supplies, to travel expenses, to staffing agencies and home office space, there is a plethora of items and expenses you’re allowed to deduct on your taxes. After all, if you spent all your income operating your business and you still have to pay tax on that, you’re not going to get very far living the American Dream.
We help countless people sort out the odds and ends of their tax information to get them the best savings and most accurate and beneficial tax returns. Please check us out by clicking the link below and scheduling an appointment with us right away. I’m here to help you wade through the tax filing paperwork, regardless of your needs!
