The 13 most popular tax deductions you should know about
MEMPHIS, Tenn. –Put that Baker’s dozen of doughnuts aside, because we have a better Baker’s dozen for you — thirteen excellent tax deductions to save money on your 2015 tax bill.
Granted, they are not as tasty as a big jelly-filled doughnut but they are far more satisfying in the end.
Go ahead, try them and see for yourself.
For some of them, you won’t even have to itemize!
1. Charitable Donations – Donations are deductible as long as they are given to a qualified charitable organization. Any such organization can provide you with verification of its status. Be sure to keep receipts and acknowledgement letters as proof of your contribution. When calculating your deduction, remember to subtract any goods and services that you receive from your donation amount.
2. Real Estate/Personal Property Taxes – Taxes that result from home ownership, such as real estate and personal property taxes, are deductible.
3. Mortgage Interest and Points – Interest paid on mortgage debt is generally deductible up to the limits of $500,000 if single or married filing separately and $1 million if married filing jointly. The points that you pay to lower your interest rate are also deductible, usually spread out over the life of the loan — although in some cases the points are entirely deductible in the year of sale.
4. Mortgage Insurance Premiums – Premiums on mortgage insurance are deductible if your adjusted gross income (AGI) is $100,000 or below. Phase-outs begin above that point, and the deduction disappears completely with an AGI of $109,000 or greater.
5. Medical and Dental Expenses – Unreimbursed medical and dental expenses can be deducted once they pass 10% of AGI, or 7.5% for those born prior to January 2, 1951.
6. Contributions to Retirement Plans – Some contributions to tax-deferred retirement accounts like traditional IRAs may be deductible. Roth IRAs are created with after-tax dollars and therefore do not qualify.
7. State and Local Taxes – You have a choice to deduct the previous year’s state and local income taxes or the sales taxes that you paid (useful in states that have no income tax). Sales tax deductions are calculated by using tables in the Schedule A instructions to find the baseline, then adding on the sales tax on any big-ticket items purchased in that year.
8. Job-Hunting Expenses – You can deduct any job-hunting costs beyond 2% of AGI as long as you meet certain criteria listed in IRS Publication 529, “Miscellaneous Deductions.”
Note: The last five deductions in this list are even more valuable because they are “above-the-line” contributions that reduce your (AGI) directly. You do not have to itemize on Schedule A to take these deductions; they have their own space on the 1040 form above the AGI calculation line.
9. Moving Expenses – Consider these “job-finding expenses.” If you have to move as part of a job relocation and that new job is at least fifty miles further away from your home than your old job was, you could deduct some of your moving expenses. For more information, see IRS Publication 521, “Moving Expenses.”
10. Self-Employment Expenses – Independent contractors can deduct 50% of self-employment taxes (essentially, what you pay as the employer since you technically employ yourself). Some health insurance costs and retirement fund expenses may be deducted as well.
11. Educator Expenses – Finally, this tax break was made permanent after years of being granted, expiring, then revived again. Qualified educators can deduct up to $250 of unreimbursed expenses used to purchase classroom supplies.
12. Educational Deductions – Tuition, fees, and interest paid on student loans may bedeductible, but it pays to see if your educational expenses can be directed toward tax credits instead. Tax credits are subtracted directly from taxes owed instead of lowering your AGI.
13. Health Savings Accounts (HSA) Deductions – Your HSA contributions are deductible, even though your employer’s contributions are not. IRS Form 8889 includes a worksheet in its instructions to help you determine your deductible amount.
Armed with these tax deductions, you are likely to save more dough than you could ever eat in doughnuts. Any questions? Ask our tax professionals!
This article was provided by our partners at moneytips.com