Each year, taxpayers have the opportunity to pay less in taxes or even receive a refund from the IRS by taking advantage of a wide range of tax deductions and credits. The twelve common write-offs listed below include tax credits and deductions that you may be able to claim.
Check the website of your state's tax department to see if you qualify for any state tax write-offs.
If you itemize your taxes, you may be able to deduct property taxes up to a specific threshold. The 2017 tax legislation revamp capped the total amount of state and local income taxes (SALT) that can be deducted at $10,000.
Unless renewed by Congress, the limit will expire at the end of the 2025 tax year.
You may deduct the interest you pay on your mortgage from your taxes. Mortgage interest paid after December 15, 2017 is deductible, but only up to $750,000 (or $375,000 for married individuals filing separately) of the total mortgage debt.
You are allowed to deduct any state income taxes that you have paid, but the total amount that can be written off is limited to $10,000. If you have paid more than $10,000 in state income taxes, you cannot deduct those taxes. This limit applies to each and every one of the state and local tax deductions that are available.
If you own a home and pay mortgage insurance premiums, mortgage interest, or real estate taxes during the year, you may qualify for a tax deduction.
In most cases, you can deduct charitable contributions in cash that total up to sixty percent of your adjusted gross income (AGI). Items or property donations are also considered tax-deductible forms of support for charitable organizations.
Although you can deduct medical and dental expenses, the amount you can deduct is limited to 7.5% of your adjusted gross income. To be eligible to deduct medical care costs on your tax return for the following year those costs must have been paid in 2022, unless charged to a credit card. In these circumstances, you can deduct the expenses from your taxes in the same year that you charged them to the credit card; it is not necessary to do so in the same year that you repaid the debt.
Travel to and from the doctor's office, as well as hospital appointments, can be claimed as medical mileage. You can deduct 18 cents per mile for medically necessary travel until June 30, 2022. The rate will be raised to 22 cents per mile on July 1, 2022, and will remain in effect until the end of the year.
The "lifetime learning credit" provides tax breaks for those who further their education by enrolling in courses at a university, technical college, or trade school. Deductible expenses are limited to $10,000 per year. Nonetheless, the maximum credit for each return is $2,000.
The credit can be used to offset the same amount of tax liability. College tuition, fees, and books or supplies for yourself, a spouse, or a dependent child are all possible. You can apply the credit to your tax bill, but you can't get a refund on the credit itself. Your tax credit is based on your income. Check IRS Publication 170 to see if your income qualifies.
The American Opportunity Tax Credit provides a tax break for the first four years of higher education. The maximum annual credit available to each eligible student is $2,500. If you do not owe taxes as a result of this credit, the IRS will refund you 40% of any remaining credit amount (up to $1,000).
The credit is worth 100% of the first $2,000 paid in qualified education expenses for each eligible student, followed by 25% of the next $2,000 paid in qualified education expenses. Look into education credits if you, your spouse, or your child are in school. For students in their first four years of college, this credit may provide greater tax savings than the lifetime learning credit. Tuition, fees, and required books or supplies for post-secondary education for yourself, your spouse, or a dependent child are all eligible expenses.
When you contribute to a retirement plan such as a 401(k), traditional IRA, or Roth IRA, you may be eligible for a tax credit of 50%, 20%, or 10%, depending on your adjusted gross income on Form 1040. The credit does not apply to rollover contributions.
The maximum creditable contribution is $2,000 ($4,000 if married and filing jointly), resulting in a $1,000 credit ($2,000 if married and filing jointly). The IRS has a chart that will help you calculate your credit.
In 2022, the maximum contribution to a traditional or Roth IRA is $6,000, plus an additional $1,000 for people over 50. Contributions to traditional IRAs are tax deductible.
If you are self-employed, you can deduct 100% of your monthly health insurance premiums for yourself, your spouse, and your dependents, regardless of whether you itemize deductions.
Even if your children are not dependents, you can deduct their premiums if they are under the age of 27 by the end of 2022. However, if you are eligible to participate in an employer-sponsored subsidized health plan for yourself, your spouse, dependents, or children under the age of 27, you cannot claim this deduction.
The maximum amount of student loan interest you can deduct from your taxes is $2,500. Your income determines how much you can deduct. For more information, see IRS Publication 970.
The standard deduction is a deduction that is automatically deducted from your taxable income, even if you do not itemize. Before deciding whether or not to take the standard deduction, compare how much your standard deduction is to how much you can deduct by itemizing.
- $12,950 for single and married taxpayers filing separately
- $19,400 for heads of households paying taxes.
- $25,900 for married couples filing jointly or qualifying widows and widowers
Keeping track of your income and tax-deductible expenses with a spreadsheet will make filing your taxes much faster and easier. It might seem hard to get everything ready and organized for your taxes, but many people make the same mistakes. Don't forget to list all of your income sources, look for and list all possible deductions, and know the difference between a deduction and a credit.
- Not listing all income sources
- Not considering all potential deductions
- Contributions to retirement accounts aren't being used to increase tax-deductible contributions.
Start by gathering all of the required documents, such as Form 1098 for mortgage interest rate deductions, if you have multiple tax deductions. Keep meticulous records for any additional deductions based on expenses or donations. Keep note of any eligible medical costs, charity contributions, and other itemized deductions if you itemize your deductions. If you intend to use the standard deduction, it is less vital to keep records.
Tax season in 2023 is likely the last thing on your mind right now. Believe us when we tell that tax preparation is a continuous procedure that spans the entire year. Keep note of these tax deductions and use the money you save to assist your family. Talk things over with your tax advisor or financial advisor to come up with a strategy that will benefit you the most!
Cheers!
As Managing Partner of Vincere Wealth, Josh assists clients in navigating financial challenges and making sound financial decisions. Having someone guide you in making sensible financial decisions today can have a substantial impact on your future financial wellbeing. Josh takes great pride in guiding customers through the complexities of taxes, real estate, businesses, employer stock, and international financial planning.
Being audited is comparable to being struck by lightning. You don't want to practice pole vaulting in a thunderstorm just because it's unlikely. Making sure your books are accurate and your taxes are filed on time is one of the best ways to keep your head down during tax season. Check out Vincere's take on tax season!
If you fall into one of the twelve categories below, you may be eligible for a tax break. Read on for information to help you get ready for the upcoming 2023 tax year.
If you fall into one of the twelve categories below, you may be eligible for a tax break. Read on for information to help you get ready for the upcoming 2023 tax year.
If you fall into one of the twelve categories below, you may be eligible for a tax break. Read on for information to help you get ready for the upcoming 2023 tax year.
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