Most Common Deductions
Are you getting all the deductions you deserve? Find out what you may be missing.
Deductions allow you to reduce your taxable income and thus reduce your tax bill. Most taxpayers are entitled to the standard deduction - a fixed amount that reduces the amount of income on which you are taxed. However, certain kinds of deductions are called itemized deductions. If you have enough of them to beat the standard deduction, it is usually a good idea to itemize instead. For many taxpayers, purchasing a home is the event that makes itemizing worthwhile. Most tax payers will not be able to itemize with the new 2018 TAX REFORM due to the fact that the standard deduction amount have increased.
Your mortgage interest and real estate taxes may be your biggest deductions, but don’t forget:
§ Medical expenses; in addition to what you’ve spent on doctors, hospitals, and medicines, other possibilities are health insurance premiums, prescription eyeglasses and contacts, hearing aids, medical transportation, equipment for disabled people, and nursing home expenses
§ State and local income taxes, include state withholdings, state disability insurance, and personal property taxes like car registrations.
§ Charitable contributions and property donated to charitable organizations, including household items donated to Goodwill and similar charities
§ Out of pocket job expenses that were not reimbursed by your employer, including car expenses (the non-commuting kind), travel expenses, uniforms, union dues, and continuing education expenses
Safe-deposit box fees, tax preparation fees, certain legal fees, and other miscellaneous
“Above the Line” Deductions
Remember, the good news is that you may claim these deductions whether you itemize or take the standard deduction.
§ Student loan interest - up to $2,500
§ Tuition and fees deduction - up to $4,000 of qualified higher education expenses §
§ Alimony paid
§ Military reservists deduction - a deduction for non-reimbursable travel expenses for reservists who service more than 100 miles from home and stay overnight
-And if you are self-employed...
§ One-half of your self-employment (social security and Medicare) tax
§ 100% of self-employed health insurance premiums for yourself and family
§ Contributions to self-employed retirement plans, such as SEPs, SIMPLEs, and defined-contribution plans
Schedule C Deductions
If you own your own business, don’t forget:
§ Advertising and promotional costs
§ Business liability insurance
§ Legal and professional services
§ Car and truck expenses
§ Wages, employment taxes, employee benefit plans, and contributions to employee retirement plans.
Of course, there are many rules and limitations about claiming deductions. Be sure to discuss them with your Income tax professional.