When tax season rolls around, you must be ready. You need to make sure you have everything in order. Your goal is to file them without issues so you can avoid an audit.
Believe it or not, you can save a bundle the next time you do your taxes. Not only are you able to file your taxes for free online, but there are likely several tax breaks you may qualify for as well. If you have never done so before, make sure you research these tax breaks and take advantage of any that you’re eligible for. But how do you know which tax breaks you qualify for? You can save a bundle the next time you do your taxes. Make sure you take advantage of tax breaks. There are several types of tax breaks available, but you must know which ones apply to you.
You might be asking, “What can I deduct on my taxes?” You can learn what to deduct on them by reading this guide. Read on to learn 5 tax deductions you can make on your taxes.
1. Tax Deductions for Homeowners
If you’re a homeowner, you can take advantage of tax breaks in your favor. There are different IRS tax breaks that can amount to thousands of dollars.
Do you have a mortgage? If you have one, you may be eligible for the mortgage interest deduction. This tax break can lower your taxable income.
You can also deduct interest from a home equity loan. This tax break applies if you used the borrowed funds to pay for a home improvement.
As a homeowner, you deduct property taxes. Depending on where you live, the property tax deduction can be valuable.
There’s a tax break for private mortgage insurance. If you have this type of insurance, you can deduct payments made on it.
Let’s say you sold your home for a profit. A capital gains tax break may apply in this situation. You must have lived in the house for 2 of the last 5 years to be eligible for it.
2. Tax Deductions for the Self-Employed
If you’re self-employed, you can take advantage of several tax deductions. The home office deduction is for any workspace that’s used for business. It applies to owned or rented workspaces.
Make deductions for your meals. The IRS classifies a meal as a business expense that you incur as you travel for business. If you eat at a business conference or eat a meal with a client, you can deduct the meal.
Self-employed individuals can deduct the business part of their phone and Internet expenses. You can deduct the Internet-related costs for running your business website.
You can deduct travel expenses, but these expenses must meet certain criteria. It must last longer than an ordinary workday and require you to sleep away from your tax home.
The purpose of the trip must be work-related. You can take advantage if you’re traveling to meet with new clients or going to learn a new skill for your business. This tax break doesn’t apply to that golf trip you’re planning for your upcoming vacation.
If you use your car for business, a deduction may apply. You can use your actual expenses or use the standard mileage rate set by the IRS. These figures will help you calculate your deduction.
If you plan on using these tax deductions, make sure to keep track of your records and receipts. These types of tax deductions tend to draw scrutiny from the IRS. It’s in your best interest to have all this information on hand in case of an audit.
3. Health Insurance Deductions
Before filing your taxes, you should see if you can deduct health insurance premiums. If you buy your own health insurance using after-tax dollars, you might be able to make a deduction.
You can deduct any qualified unreimbursed healthcare expenses. This includes your expenses, your spouse’s expenses, or your dependents’ expenses. You can factor in the expenses only if they exceed 7.5% of your adjusted gross income.
4. Charitable Contributions
Are you the type of person who has a good heart? If you make charitable contributions in cash, you can deduct them on your taxes. The deduction can be up to 60% of your adjusted gross income.
This deduction also applies to donated items and property. These are considered itemized deductions.
Did you happen to donate money for pandemic purposes? The CARES Act allows people to take a deduction of up to $300 made in 2020.
You can take this specific deduction with the standard deduction. There’s no need to itemize it.
5. Education Tax Deductions
College students can take advantage of different tax deductions made available to them. If you’re planning to take college classes, you deduct up to $10,000 in expenses for an unlimited number of years. This is known as the Lifetime Learning Credit.
The credit allows for a dollar-for-dollar reduction. It can cover expenses related to tuition and books. It also covers fee payments.
There’s also the American Opportunity Tax Education Credit. This credit covers the first four years of higher education. A student can claim up to $2,500 each year.
What if the amount of taxes that you owe is zero because of this credit? The IRS might refund 40% of any remaining amount of the credit.
There’s a catch you should know about. You can’t claim this credit in the same year that you claim the Lifetime Learning Credit.
It’s a good idea to seek help if you need it to file your taxes.
What Can I Deduct on My Taxes … Now You Know
You might have been asking before you read this guide, “What can I deduct on my taxes?” There are different tax deductions you should know about. You can get the most on your upcoming tax refunds by using these deductions.
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