Deductions are expenses or contributions that you can subtract from your total income to reduce your taxable income. Deductions can potentially lower your overall tax liability. The specific deductions you can claim on your taxes may vary depending on your individual circumstances, your state of residency, and any changes in tax regulations. Here are some common deductions you may be eligible to claim:
In the United States, most taxpayers are allowed to make a standardized deduction, should they opt to submit their tax form without itemizing deductions. The standard deduction is a specified dollar amount which reduces the amount of income which you’re taxed. This deduction is adjusted each year for inflation. Your standardized deduction will vary depending on your age, filing status, and whether you can be claimed as a dependent.
If your eligible expenses exceed the standard deduction, you may choose to itemize deductions. Common itemized deductions include:
Mortgage Interest: Deducting interest paid on a qualified mortgage.
Property Taxes: Deducting property taxes paid on real estate you own.
State and Local Taxes: Deducting state and local income taxes or sales taxes.
Charitable Contributions: Deducting donations made to qualified charitable organizations.
Medical Expenses: Deducting eligible medical and dental expenses that exceed a certain threshold. In addition, contributions to an HSA are often tax-deductible and can be used to pay for qualified medical expenses.
Education Expenses: Deducting qualified education-related expenses. Expenses such as student loan interest and tuition may be deductible.
Job-Related Expenses: Deducting certain job-related expenses that exceed 2% of your adjusted gross income (AGI).
Casualty and Theft Losses: Deducting losses due to a federally declared disaster or theft.
Retirement Contributions: Contributions to retirement accounts, such as 401(k)s or IRAs, may be deductible, reducing your taxable income.
Self-Employment Expenses: If you're self-employed, you can often deduct business-related expenses, such as office supplies, travel, and home office expenses. If you own a pass-through business, you may be eligible for a deduction on a portion of your business income.
Alimony Payments: In some cases, alimony payments may be deductible by the payer and taxable to the recipient.
Energy-Efficient Home Improvements: Some energy-efficient home improvements may qualify for tax credits, reducing your tax liability.
Charitable Mileage and Travel Expenses: If you volunteer for a charitable organization, you may be able to deduct the mileage and travel expenses related to your volunteer work. Need extra cash to pay your taxes? This site pays up to $25 per survey.
Your tax deductions vary significantly depending on your location, financial circumstances, and other factors. Ensure that you are taking advantage of all possible deductions by consulting with a tax professional and keeping accurate records of your expenses.