With a list of tax deductions in your pocket, you have a much better chance of getting back the money you deserve and reducing your stress to basically nil. It’s that special time of year. Not as jolly as the holidays or as jovial as a birthday. No, it’s a more anxious time of year. A time when our attention turns firmly to thoughts of tax tips, deductions, and refunds. The good news? Here’s how to give tax season a facelift by completing that return right.
List of Tax Deductions | Refund and Deductions Category
What is a Tax Deduction?
First, it’s important to understand exactly what a tax deduction is. A deduction is a reduction of your taxable income. The deduction is worth a certain amount of money and that offsets the amount of income on which the government can tax you.
The standard deduction is a good example. It is $6,350 for single taxpayers, $12,700 for married couples filing Married Filing Jointly (or $6,350 for Married Filing Separately). It is $9,350 for the head of household. Depending what credit you can take, the IRS reduces your taxable income accordingly.
A credit, on the other hand, is not a deduction. It offsets taxes dollar for dollar. That means however much would be levied against you in taxes is diminished by the amount of the credit. It’s much better because it results in much larger savings. (This is especially true in the case of refundable credits, which result in a refund even if you wouldn’t have owed any taxes). That said, deductions are obviously still very beneficial. Let’s look at what they are.
Your Handy List of Tax Deductions
Beyond the standard deduction discussed above, you can take many other deductions on your tax return. These include, but are not limited to, deductions for:
As a worker, you can claim a number of different exemptions. These include unreimbursed expenses for employees as well as itemized deductions for self-employed people. You can depreciate items you use for work, deduct the square footage of a home office, or deduct retirement plan contributions.
- Parents and Families
Parents can claim not only exemptions for themselves but for children and dependents. Anyone living with you who is dependent upon you counts and the number of potential exemptions is unlimited. For 2017, the dependent tax exemption is $4,050. You can also get tax exemptions for childcare and adoption fees.
- Medical Expenses
If your expenses totaled more than 7.5 percent of your income in 2017, you can deduct the remaining balance from your income. If you contribute to a health savings account, you may be able to deduct that money as well.
Going to school will usually net you some good tax deductions in the form of loan interest, tuition, and fees. You can only deduct the latter, however, if you did not claim the student tax credit for 2017.
When you donate to charity, you can use the amount of the donation to deduct your taxable income.
- Car and Travel
If you travel for work, you can recoup some of the money you spend in transit. To do so, you depreciate your car to reflect the wear and tear you put on it while traveling. You calculate the deduction amount by taking the total amount of gas, car repairs, oil, tires, etc. and multiply that by the percentage of business use. Another option is you can just take the standard mileage rate. That’s $.55 multiplied by the percentage of business use.
- Life-Changing Events
Sometimes life isn’t too kind to us. State and federal governments, however, try to minimize hardships during those times with a number of deductions. If you lose your job or are searching for a new one, you can deduct some of those expenses on your return. You can also deduct expenses if you get divorced or separate from your spouse.
Life-changing events don’t have to be negative, either. If you go to college, purchase a home, adopt a child, or get married, those all result in tax deductions as well.
- Other Categories
Homeowners, teachers, and others may be able to deduct additional expenses.
Watch this video by Entrepreneur about writing off auto expenses:
It isn’t possible to go over every single deduction in this article. However, we have addressed the most common tax deduction examples. If you believe you fit into any of those, speak to a tax preparer. They will help you make the best financial decisions by sussing out all potential deductions for you. To your stress-free tax season in 2018!
What can you say about this list of tax deductions? Share your thoughts in the comments section below!