Things You Can Write Off On Your Taxes – Have you ever seen a post on social media asking you to make a tax-deductible contribution to a charity? (Hopefully it was a legitimate one and not George Costanza’s Human Fund.) Or maybe you had a conversation with your dad about tax write-offs for mortgage interest and your eyes glazed over. We’ve been there too! (Sorry, Dad).
Many people do not know what tax deductions are available or how to claim them on their tax returns. But you don’t want to be that guy or gal because it could mean leaving a good chunk of money in the hands of the IRS without even knowing it!
Things You Can Write Off On Your Taxes
Simply put, a tax deduction is an expense that can be deducted from your income to reduce how much you pay in taxes. Tax deductions are a good thing because they lower your taxable income, which also lowers your tax bill in the process. They can help you shave hundreds, maybe even thousands of dollars off your tax bill.
Pre Tax Vs. Post Tax Deductions
For example, charitable donations are one of the most common tax deductions. This means you can “write off” the money you gave to charity last year and reduce your taxable income by the amount you gave.
So, if your income is $50,000 and you gave a $1,000 gift to your favorite charity last year, you can claim that gift as a tax deduction, and you’ll only be taxed on $49,000 instead of $50,000.
Tax bill by exactly $1,000. A tax deduction is not that simple. If you get a $1,000 tax deduction and you’re in the 22% tax bracket, that deduction reduces your taxable income and saves you $220 when all is said and done.
Tax credit of $500, but owe only $200 in taxes, the IRS will send you a check for $300. On the other hand, if you have a
Top Tax Write Offs That Could Get You In Trouble With The Irs
The standard deduction is an amount set by the IRS each year, and it’s the easy option—it’s like an automatic tax-free. If you choose to take the standard deduction, your taxable income is automatically reduced by a set amount based on your filing status (such as single, married filing jointly or married filing separately). This lowers the amount of tax you have to pay. You don’t have to dig through receipts or bank statements to find your deductions.
Itemizing your deductions takes more work—you’ll have to list all the deductions you want to claim one by one. And you’ll need to file a Schedule A form with your tax return and save your records to back up your claims.
Yes, itemizing is a bit of a hassle, but it’s worth it if you can claim enough deductions to lower your taxable income more than the standard deduction.
How do you know which option is best for you? There are a few things you should know before you make your decision this year.
What Is A Tax Write Off And How Does It Work?
Thanks to the 2018 tax reform bill, the standard deduction nearly doubled from what it was. That’s good news for many taxpayers! For the 2022 tax year, the standard deduction is slightly adjusted for inflation. So, if you’re single, the standard deduction is now $12,950. Married and filing jointly? Your standard deduction is $25,900. Those numbers continue to climb in 2023.
If you or your spouse are over 65 or legally blind, you may be able to get a larger standard deduction. But if you’re a nonresident alien or a dual-status alien, or someone else claims you as a dependent on their return, your standard deduction may be lower.
Written off from your taxes. Here are some of the most common deductions that many taxpayers can take advantage of:
The more you give, the more you can deduct from your taxes! If you itemize your deductions, any money you gave to your church, your alma mater, or your favorite charities can all be written off your taxes. You can deduct any amount of charity giving up to 60% of your taxable income.
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Congress passed a spending package for 2021 that allowed anyone electing the standard deduction to take an “above-the-line” deduction on charitable gifts up to $300 for individuals and up to $600 for married filing jointly.
Do you have health insurance but are still paying out of pocket for medical or dental expenses? The IRS allows you to deduct medical expenses that are more than 7.5% of your taxable income for things like appointments with medical professionals or dentists, prescription drugs, contacts or glasses, and health insurance premiums (paid with after-tax dollars and not reimbursed by your employer), to name just a few!
To break it down: If your adjusted gross income is $50,000, then 7.5% of that is $3,750. So, if you have $5,000 in medical expenses that
Covered by your health insurance, subtract the $3,750 from that and you get $1,250 as a tax deduction.
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To deduct either your state and local sales tax or income tax, along with some foreign taxes. If you live in a state with no income tax or you’ve made some big purchases like a new car or a set of furniture for the living room, the sales tax deduction is the way to go. To calculate your deduction, check out the IRSsales tax deduction calculator. And if you’re a homeowner, you can also deduct property taxes from your tax bill.
The Tax Cuts and Jobs Act, passed in 2018, limits the total amount you can deduct in income, sales and property taxes to $10,000.
Interest paid on your student loans (up to $2,500) is one of the rare deductions you can take, even if you don’t itemize.
However, as the Department of Education has suspended student loan payments and interest until 30 June 2023, there is no student loan interest expense to claim at the moment (unless you have taken out private loans, in which case you can claim the least of $2,500 or the amount of interest you actually paid during the year).
Don’t Forget To Write Off These Items When You’re Doing Your Taxes
But don’t let that stop you from paying off your student loan debt! When payments and interest are interrupted, it’s the very best time to get gazelle intense and pay off your student loans faster.
Ah, the joys of home ownership! There’s the big backyard, the white picket fence, your mortgage payments. . . ok maybe not that last part. But at least you can deduct the interest you paid on up to $750,000 of mortgage debt.
If you happen to have a traditional IRA, those contributions are most likely tax deductible. But your deduction may be limited based on your income and whether or not you (or your spouse if you’re married) have a retirement plan through your workplace.
But here’s the catch: You’ll have to pay taxes on the money you take out of your traditional IRA in retirement.
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Therefore, it is recommended to invest with aRoth IRAinstead. Roth IRAs are funded with taxable income. You won’t be able to deduct Roth contributions on your taxes now, but who cares? You will be too busy to enjoy
If you’ve turned part of your home into your own workspace that’s used only for business, you can write off work-related expenses like rent, utilities and maintenance costs.
It may require extra measurements and calculations as you prepare to file your taxes, but it’s worth it if you qualify for this deduction!
Here’s the deal: Taking that automatic standard deduction makes sense for most taxpayers. But it’s still important to add up your itemized deductions before making that decision.
Big Tax Deductions (write Offs) For Businesses
Take Linda and Eric, for example. They’re married and filing jointly, so they automatically qualify for that $25,900 standard deduction — and they’re excited about that big amount!
But just to make sure, they go through their records to find all the tax deductions they can claim if they choose to itemize. Would they save money that way?
After adding up their itemized deductions, they see that they can knock over $27,000 off their taxable income, potentially saving them hundreds of dollars in taxes.
Do you think Linda and Eric regret going back through all their receipts, files and bank statements? Not a chance!
What Can I Deduct
Meet Shawn. He is a single guy who has just started in his career. He puts in crazy hours at his accounting job and rents a small apartment while trying to work through his debt snowball. Since he doesn’t have as many expenses to deduct, the standard deduction provides a much greater tax benefit than an itemization would. It’s a no-brainer!
When it comes to taxes, everyone’s situation is different. There is no one-size-fits-all solution! If you’re a homeowner or business owner, you’ve made a lot of charitable contributions, or you’ve paid out of pocket for hefty medical expenses, then itemizing may be the best move for you.
Affordable to do your taxes—with no hidden fees. That’s what we call a win-win! The bottom line? You want to make sure you get the most out of all these tax deductions. Learn how to love more
If in doubt, consult a tax advisor. With years of experience behind them, their wealth of knowledge can take the guesswork out of taxes—protecting you and your wallet.
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