Come tax season, your ultimate goal when it comes to filing your return is to maximize your tax savings. There are several ways to this both throughout the year with investment options and savings plans, and also when it comes time to actually file a return. There are two options for deductions when you finally get around to putting together your tax information: the standardized deduction and the itemized deduction. If you’re in the Durham area and you need some help from a tax preparer to figure out which deduction option is best for you, give us a call by clicking the link below.
For the sake of this discussion, I’m going to assume you’re going with the Itemized Deduction option. The standardized option simply means you’re given an allocated amount from the IRS based on your filing status (single, Married filing jointly, qualifying widow(er), etc.) to deduct from your taxable income. There is a huge percentage of Americans that either don’t have enough in various life expenses throughout the year to exceed the standard deduction, or are not informed about what exactly they can itemize. When you file your taxes, you want to go with whichever deduction option saves you the most money. To help inform you on what exactly you can deduct, find a tax professional for itemized tax deductions.
10 common itemized tax deductions:
Mortgage Interest – If you pay a mortgage, your mortgage company will most likely issue you a form 1098. This form will contain pertinent information that you can itemize on your return. Interest, insurance, and if you purchased your home, eligible deduction points are all things you claim on your return.
Charitable Donations – If you made contributions to a recognized and qualifying charity or organization, you may be able to deduct these expenses.
Medical and Dental Expenses - While not all expenses relating to your health are deductible and there is a percentage of your Adjusted Gross Income you have to exceed in order to utilize this option, these bills still might be a good way to save on your taxes. In the unfortunate event that you underwent surgery or had extensive medical or dental issues over the last tax year, deduct those costs! If you spent any money out of pocket maintaining your health or preventing illness, that’s good for deduction.
State and Local Income Tax – If you paid state taxes last spring, you can deduct that cost.
Travel Expenses - This only applies if your travel expenses are related to your small business or you’re self-employed. Airfare, ground travel, dining, and even entertainment costs can be deducted from your tax return if they directly apply or are related to your business. Entertaining new clients, or traveling to a trade show are business related expenses! To make sure you’re claiming what’s allowed, meet with an accountant to keep you well within your allowances.
Auto Expenses – Again, if you have a vehicle you use for your business, you can deduct some of these costs. There are two ways to claim. The standard mileage rate gives you a percentage amount for every mile you drive doing business related things. The actual expenses way to deduct takes into account your maintenance and gas costs. If you happen to share a vehicle between business and personal use, you’ll have to do some math. Either way, make sure you keep meticulous documentation to keep track of receipts and mileage.
Student Loan Interest Paid by Your Parents – In the past there were no tax breaks for paying back your student loans. Now however, the IRS views your parents paying back your student loans as them having given you the money, and you then paid your loan back with that money. That qualifies you for up to $2,500 to deduct.
Jury Pay You Had to Pay Back to Your Company – Some companies will actually continue to pay you your salary when you’re selected for Jury duty. The downside is that some of those companies then ask you to return that money to the company coffers. You’re still required to claim that pay as income, but the good news is you can deduct that amount at tax time.
The Cost of Job Hunting – If you’re one of the unlucky (or maybe lucky, as the case may be) Americans who found yourself pounding the pavement in search of the perfect new career last year, you may be able to deduct some of those expenses. If you hired someone to write your resume, ordered business cards, or paid cab fare to get to an interview, these are all qualifying deductions.
Small Business Expenses – Capital expenses, startup costs, supplies, home office and advertising. These are just a select few of the itemizations you can claim that surround running your own business. To calculate your home office space, measure the space and divide by the square footage of your home. Just remember, you can’t claim your whole living room because you have a desk in the corner. Only claim your actual dedicated work space. The percentage you come up with can also be applied to utilities, housekeeping costs, and repairs made to your home.
There are countless other deductions you can itemize, some that are obvious and some you may need help to discover. Find a tax preparer to help you go through all of your expenses and see just how much you can save on your return. The list of itemizations is ongoing, and there are even more if you happen to be a small business owner or if you’re self-employed. If you think you need some questions answered, please reach out to us by clicking on the link below to check out our profile. We would love to help you find the most deductions possible to maximize your income tax savings!
