What is a tax deduction exactly? Simply, tax deductions lower your taxable income; this plays to your favor as the lower your taxable income is, the more cash you get to keep in your pocket when you go to pay taxes. There are deductions for all sorts of things; here are 8 tax deductions you may not know about that could significantly save you money.
Real Estate and Property
The American dream: owning property. If you own a home, especially in Denver, you will have taxes on that property or real estate and they can become quite hefty in the scheme of things. The good news is that property and real estate taxes are deductible.
Donations to Charity
Kind of like karma, giving to charity can come back and help you down the road. If you donate to a qualified charitable organization you can receive a deduction for your donation; just ask the organization if they are qualified and they should be able to provide you with verification. Denver and the surrounding metro area has countless charities that are qualified. Find one that you are passionate about and make a difference in your community! Just remember to keep receipts or any records that document your contribution.
You are going to have medical expenses; that is just part of being human. You can receive a deduction for unreimbursed medical expenses, and this applies to dental as well. However, the expenses have to pass 10% of your adjusted gross income (or AGI).
State and Local Taxes
You have the ability to deduct state and local income taxes or the sales taxes that you paid all from the previous year. To calculate your sales tax deduction, use tables in the schedule A instruction section figure out the baseline; you then will add on the sales tax of any big purchases you made throughout the year.
Generally, the interest that you pay on mortgage debt is deductible up to $500,000 if it is a single filing or 1 million for a married filing. You can also use the points that you pay to lower your interest rate as a deductible over the course of that loan.
Job Hunting and Moving Expenses
Job hunting can be stressful, however, there is some relief in the tax code. Any job hunting expenses can be deducted beyond 2% of your adjusted gross income. However, you must meet the qualifications as listed in the IRS Publication 529, “Miscellaneous Deductions”.
This is a cool one, especially since a lot of teachers put their own resources into educating our youth by buying their own supplies for the classroom. Teachers who qualify can deduct up to $250 of unreimbursed expenses that are used to buy classroom-related items.
Health Savings Account
Have a health safety net and score another deduction. HSA contributions are deductible (however the employer’s contributions are not). Use IRS Form 8889 for instructions on how to determine your deductible amount.
There are tons of ways to reduce your taxes or increase your return; ultimately the goal is money in your pocket and Boxelder Consulting is here to help you achieve that goal. If you are unsure if you qualify for any of these deductions, reach out to us today and we will access your finances and assets and find deductions that are right for you.