Most taxpayers will take the standard deduction of $6,100 when filing their taxes. Those who are looking to complete their tax forms in a short amount of time will usually opt for this deduction. So will those who think they will not be able to itemize properly. The truth is itemizing deductions is a great plan. There are some things that people might not know of that will count as deductions to help cut down on their tax burden when it comes time to file on April 15. Here are some things to remember when thinking of itemizing.
Mortgage Interest Expense
This is one of the biggest deductions that most people will take. The vast majority of people have to take out a mortgage to buy a house. While the purchase price of the home is not a deductible expense, the government does give homeowners a break when it comes to the interest that they pay. This expense can be deducted from the gross income to cut down on tax liability. If you’re looking to itemize, you can sometimes do better than taking the standard deduction just based upon this expense alone!
Many people forget that they can deduct the amount of money that they give to charitable organizations like churches, rescue missions, schools, or hospitals. Looking through your records to find the computer checks that were made out to these organizations shouldn’t be necessary. Charitable organizations are supposed to provide people who give over $250 a statement at the end of the year. A canceled check can serve as proof of a donation under $250. Keep in mind that donations don’t have to involve money. Giving goods to organizations like Goodwill or the Salvation Army can also offer a deduction with a receipt. While the charity should be able to provide you the needed info, keep good records for yourself just in case you get audited.
Don’t forget that state and local taxes can be a deduction from a person’s income to lower the tax burden at the federal level. People have the option of claiming the amount of income tax or the amount of sales tax paid out over the year. Unless some large items like vehicles are purchased during the year, income taxes will generally yield the best deduction.
The government gives tax breaks to those seeking higher education in an attempt to encourage people to be lifelong learners. This means that student loan interest can sometimes be deducted, whether you attend a public or private institution. So can the amount of tuition and fees that you pay out of pocket. You can take this deduction for yourself, your spouse, and dependents. Keep in mind that scholarships will need to be deducted and fees for items like room and board, books, etc. don’t qualify.
When it comes to itemizing on an annual tax return, there are a number of ways to successfully and legally deduct certain items when you file. These four tips can help save you money. Of course, it is wise to check with a tax professional to ensure that all is deducted properly. So as you prepare your taxes this year, keep in mind that the standard deduction may not be your best option and look into itemizing.