Tax season is a prime opportunity to reduce your taxable income and save money. However, many taxpayers miss out on valuable deductions simply because they are unaware of them. This guide outlines key tax deductions that can help you keep more of your hard-earned money.
Standard Deduction vs. Itemized Deductions
Before claiming deductions, it’s essential to determine whether the standard deduction or itemizing provides greater savings:
Standard Deduction: A fixed amount deducted from taxable income. For 2023, it’s $13,850 for single filers and $27,700 for married couples filing jointly.
Itemized Deductions: Specific expenses, such as mortgage interest and medical bills, that can be listed on Schedule A.
Tip: Compare both options to ensure you maximize your deductions. Lodestar Taxes Tax Planning Services can help you determine the best approach.
Medical and Dental Expenses
If your medical and dental expenses exceed 7.5% of your adjusted gross income (AGI), you may qualify for a deduction. Eligible expenses include:
Doctor visits and hospital stays
Prescription medications
Long-term care insurance premiums
Medical-related travel expenses
Tip: Keep receipts and records for all medical expenses throughout the year.
Mortgage Interest Deduction
Homeowners can deduct interest paid on mortgage loans up to $750,000 (for loans taken after December 15, 2017).
Tip: Your mortgage lender will provide Form 1098, which details the interest paid for the year.
State and Local Tax (SALT) Deduction
You can deduct up to $10,000 in state and local taxes, including:
Property taxes
State income or sales taxes
Tip: Maintain records of tax payments throughout the year to maximize this deduction.
Charitable Contributions
Donations to qualified charities, whether in cash or donated goods, can be deducted if you itemize.
Tip: Obtain receipts for donations over $250 to comply with IRS requirements.
Business Expense Deductions
If you are self-employed or own a business, you can deduct various expenses, including:
Office supplies and equipment
Business travel and meals
Home office expenses (if applicable)
Marketing and advertising costs
Tip: Keep detailed records of business expenses. Lodestar Taxes Tax Preparation Services can help ensure accurate reporting.
Education-Related Deductions and Credits
If you’re pursuing higher education, you may qualify for deductions such as:
Tuition and Fees Deduction: Deduct up to $4,000 in qualifying expenses.
Lifetime Learning Credit: Reduce your tax bill with education-related credits.
Tip: Compare education-related tax benefits to find the most valuable savings.
Retirement Contribution Deductions
Contributing to retirement accounts can lower your taxable income:
Traditional IRA: Contributions may be tax-deductible, depending on income limits.
401(k): Pre-tax contributions reduce taxable income.
Tip: Maximize contributions to take advantage of tax savings while securing your financial future.
Student Loan Interest Deduction
If you’re repaying student loans, you may deduct up to $2,500 in interest paid during the year, even if you don’t itemize.
Tip: Your loan servicer will provide Form 1098-E, detailing the interest paid.
Child Tax Credit
Families may qualify for up to $2,000 per child under 17, subject to income limits.
Tip: Check IRS eligibility criteria to ensure you receive the full credit amount.
Optimize Your Tax Strategy with Professional Guidance
Maximizing deductions can significantly reduce your tax burden. Staying organized and informed is key to taking full advantage of available tax breaks. Lodestar Taxes IRS Resolutions Services can help navigate tax complexities and ensure you get the best possible return.
Don't leave money on the table—consult with a tax professional today to optimize your financial future!
