Reducing your Tax Bill with Deductions
It is tax time again to figure out how to either pay the IRS the least amount of money possible, or get the most money back from the IRS. Frequently it all boils down to deductions. What is a deduction? Deductions are things that reduce your overall tax bill.
Most people take the standard tax deduction, not wanting to mess with itemizing things. But if you can reduce your tax bill by itemizing then that is definitely the way to go. There are many things that you can itemize on your taxes.
If you have a mortgage then the chances are very good that you would benefit from itemizing, because typically people are paying so much in interest that the mortgage interest alone will be more than the standard deduction. If you bought a new home or refinanced an existing mortgage you can deduct any points paid on these loans. You can also deduct property taxes.
Do you give to charities? You should be keeping track of cash and items donated throughout the year. At the beginning of every year I start a file for anything that might be tax related. This way it is super easy for me to keep track of deductions. When I drop a bag of clothing off at Goodwill I save the receipt and can deduct what those items are worth. When I donate cans of pineapple for a church mission project I save the receipt, circling the items donated and making a note of who I donated them to. If you make cash donations make sure to get a receipt.
If you are an educator and incurred expenses for your classroom you can deduct these items. You can also sometimes deduct work related educational expenses. Speaking of work, you can usually deduct work related expenses as well. There are strict guidelines on these deductions so make sure you check with the IRS. It is always worth it to check to make sure you deduct the proper things.
Medical expenses are deductible as well. If you paid medical premiums out of pocket, after taxes were taken out, then you can deduct them. As with all deductions, you don’t get the full amount. For each deduction, the IRS has set guidelines as to what you can deduct. For instance you can deduct medical expenses if they exceeded 7.5% of your income. Of course each deduction has a different percentage, so pay attention when filling out the forms.
If you had casualties from a natural disaster, or even a theft, you can possibly deduct some of those expenses as well. If you incur expenses for your business some of these can be deducted as well. There are many things that you can deduct on your tax bill. Even if it requires some digging through things it will be worth it in the end when you pay less in taxes. Keep in mind though, that I am not an expert and you should always check with the IRS if you have any questions.