Deductions are one of the most important aspects of personal finance. They reduce your taxable income, which means you get to keep more money in your pocket. However, many people are not aware of all the deductions they can claim on their tax returns. In this article, we will discuss some of the most common deductions that you may be eligible for.
1. Charitable donations: If you make charitable donations throughout the year, you can deduct them from your taxes. Keep a record of all your donations and make sure to get a receipt from the charity.
2. Home office expenses: If you work from home, you may be able to deduct some of your home office expenses like internet bills and phone bills.
3. Medical expenses: You may be able to deduct medical expenses if they exceed 7.5% of your adjusted gross income (AGI). This includes out-of-pocket costs like co-pays and prescriptions.
4. State and local taxes: You can deduct state and local taxes up to $10,000 per year.
5. Mortgage interest: If you own a home, you can deduct mortgage interest paid during the year on up to $750,000 in debt for homes purchased after December 15th, 2017 or $1 million before that date.
6. Student loan interest: You can deduct up to $2,500 in student loan interest paid during the year as long as your AGI is below certain thresholds ($85k for individuals; $170k for couples filing jointly).
7. Retirement contributions: Contributions made towards retirement accounts like IRAs and 401(k)s are tax-deductible within certain limits.
8. Education expenses: Qualified education expenses such as tuition fees or textbooks may be deductible under certain circumstances.
9. Business-related travel expenses: Business-related travel expenses such as transportation costs (e.g., flights) and lodging fees may also qualify for deductions under specific conditions.
10. Child and dependent care expenses: You may be eligible for deductions if you pay someone to take care of your child or dependent while you work or look for work.
In conclusion, understanding deductions can help you save money on your taxes each year. Keep good records of all your expenses throughout the year so that you can easily claim them come tax season. And remember, it’s always a good idea to consult with a tax professional to ensure that you are maximizing your deductions as much as possible.