You take pains to save money all year long, brewing your own joe instead of purchasing fancy coffee shop brews, clipping coupons and renting a DVD instead of visiting the cinema on Saturday night. Why should you approach taxes any differently? Don’t overlook the chance to cut your tax bill by claiming deductions. If you’re in the 20 percent tax bracket, every $5 in reductions cuts $1 from your final tax bill. Make use of these important deductions to reduce your tax burden if you itemize your deductions.
Homeowner Related Deductions
Home ownership isn’t just a wise investment. It’s a door to tax breaks. The home mortgage interest deduction is one of the most valuable deductions for individuals. The Internal Revenue Service allows homeowners to deduct all interest paid on mortgages for primary and secondary residences. Investment properties don’t qualify for the deduction. If you pay property taxes on your home, chalk up another deduction, as you may claim the entire property tax bill if it’s based on the assessed value of your home. If you purchase points when securing a mortgage or when refinancing, you may deduct the cost of points in many circumstances.
You don’t have to be a business owner to write off business expenses on your personal income taxes. Many unreimbursed career-related expenses qualify as deductions. Do you drive your own car in the course of business? That’s worth 55 cents per mile, although you can’t claim your daily commute and must track each trip in a log. Claim business-related travel expenses, including plane or train tickets and lodging, as well as other costs incurred on a business trip, such as the cost of meals, taxi fares and -- in many cases -- entertaining clients. You may also write off job hunting costs and the cost of relocating to your primary job. As with any other deduction, you’ll need to hold onto your receipts to back up your claims if an auditor pays you a visit.
Medical and Dental Expenses
If you face considerable medical expenses each year, you may be able to write off some of the costs, such as health insurance premiums, bills or co-pays for trips to the doctor, the cost of ambulance rides, prescriptions, glasses, hearing aids, prosthetics and crutches. Health-related vacation costs don’t qualify, and neither do the price of over-the-counter drugs or most cosmetic surgeries. The IRS allows you to claim medical expenses only when the combined amount of qualifying medical costs exceeds 7.5 percent of your adjusted gross income.
Sure, you give to charity because it’s the right thing to do and it makes you feel warm inside, but that’s no reason not to take advantage of the deductions the IRS allows for your generosity. You can’t claim any contribution that provides you with goods and services, such as buying Girl Scout cookies or a trip to a charity ball. If you provide a cash donation, you must maintain receipts for each gift. If you donate goods, you must also provide written documentation from the charity that documents a description of the gift and its fair market value on the date it was given.
- Kiplinger: Deductions for Homeowners
- Internal Revenue Service: Tax Topic 504- Home Mortgage Points
- Nolo.com: Top Seven Tax Deductions for Seniors and Retirees
- Internal Revenue Service: Tax Topic 502- Medical and Dental Expenses
- Internal Revenue Service: Tax Topic 510 - Business Use of Car
- Internal Revenue Service: Tax Topic 511 - Business Travel Expenses
- Internal Revenue Service: Tax Topic 506 - Charitable Contributions
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