Now that we’re in the current tax season, you may be wondering how to save money on the returns you file. It isn’t the easiest process, especially since the material distributed by the IRS seems as though it written for an Accountant, not the average Joe. Even if you understand the material, it still is a worthy use of your resources to Find a Tax Professional for Federal Tax Deductions like BTL & Company, P C, Tax & Accounting because our team of professionals specializes in finding all the deductions that you are entitled to, ensuring your tax burden is reduced and your returns are maximized. In this article, we’ll give an overview of federal tax deductions to help clarify what matters most: your money.
A tax deduction reduces your taxable income paid to the Internal Revenue Service (IRS). In order to find out how much you owe in taxes for the bill, your total tax deductions are subtracted from your taxable income. Similarly, tax credits are similar to tax deductions, but they reduce your tax bill dollar for dollar.
The amount and type of deductions that are applicable to you are dependent on your current life situation and events.
What types of tax deductions are available? There are tax deductions for:
Life can be unpredictable, often changing your financial circumstances and leaving your future uncertain. Fortunately, the IRS offers deductions to help you cope and get back on track. Deductions are available for:
Similar to tax deductions, you may be able to claim deductions if your children qualify as dependents. Also, there are tax credits you can claim for child care and adoption expenses.
Home ownership can lead to a significant tax burden. To offset this burden, homeowners can take advantage of deductions that relate to almost every facet of your home, including but not limited to:
Depending on your industry and business focus, there are many deductions available to reduce your taxes. In addition, if you’re looking for employment, you can deduct expenses related to your job search. And if you’ve contributed to a retirement plan, you may be eligible to claim a tax credit and deductions.
Medical expenses can quickly add up and put your financial future in jeopardy. Luckily, there’s deductions according to the “7.5% rule” for essential medical procedure that must be prescribed by a physician. Essentially, you are allowed to deduct the remaining medical bills after subtracting 7.5% of your gross income from the balance. For instance, if your bills are $16,000 and your gross income is $50,000/year, you can deduct $8,500 from your taxes.
If you’re obtaining an education, there is a deduction available for student loans. Students also are eligible for tax credits, such as the Lifetime Learning Credit. For educators, there’s a deduction of educator expenses, such as classroom teaching materials.
Uncle Sam rewards your altruism by offering deductions for charitable contributions and donations to qualified charities. Cash contributions are available up to 50% of your gross income, while donating your property (like a vehicle) is subject to donation for the fair market value that you’d obtain from private parties.
There are two different types of deduction methods that you can take advantage of during tax time: standard deduction and itemized deductions. Depending on your career and living situation, either one may you more cash. To determine which is the best course of action, Find a Tax Preparer that is familiar with your particular situation.
If you use your vehicle for business purposes, you can be eligible for deductions. This is also true for medical purposes and charitable purposes. And if you have an energy-efficient electric car, you can claim a deduction as well.
While we’ve covered a large amount of deductions, there are many, many more deductions that don’t fit into a single category or seem unorthodox. For instance, gambling losses are subject to a deduction, as is the expenses of guard dog ownership (only while the dog is on duty). Because of this ambiguity, it is essential to hire a Tax Preparer to assist you in finding out how to reduce your tax burden.
There are certain expenses you will NOT be able deduct from your taxes. Unfortunately, the list is specific to your current life situation and career, business type and so forth. Also, tax deductions change yearly, with some being reduced or expiring, so it is essential to adapt to new laws. Again, having an Accountant versed in your particular situation is invaluable to saving money and avoiding an unnecessary audit.
BTL & Company, P C, Tax & Accounting