In the first month of each new year comes a dreaded question for workers – have you done your taxes yet? No matter where you stand on the income scale, taxes are difficult to deal with and can make you feel like your hard-earned money is slipping through your fingers.
To help with that, here are five tax deductions you may not have known about that can change your tax filing status for the better.
Mortgage Interest Charges
Homeowners still paying off their mortgage may be glad to know that they can deduct all interest payments made on mortgages at or below $750,000. This number gets halved for married couples filing separately, but that can still go a long way toward making up for house payment problems throughout the year.
Before applying this deduction, know that it only counts for mortgages after December 2017, and any interest accumulated above that $750,000 threshold can’t be deducted.
Student Loan Interest Charges
Similarly to mortgage interest, you can deduct interest charges from your student loans. The maximum deduction amount is much smaller, though, at $2,500. You can’t deduct student loan interest if your adjusted gross income is over $80,000 annually as an individual or $165,000 as a married couple filing jointly, so keep that in mind.
If you’ve made any cash or item donations to charity during the year, you can deduct a certain amount of that charitable contribution on your tax return. You can deduct cash donations in amounts up to 60% of your adjusted gross income, and as of 2021, base deduction amounts came to $300 for individuals and $600 for married couples filing jointly.
Check the IRS website for more information on item donation tax deductions.
State Income Tax
Did you know you can deduct your state income taxes that you’ve already paid on your end-of-year tax filing? The deduction only counts for up to $10,000 of your state and local taxes and can include property tax.
State income tax deductions are one of the most significant itemized deductions you can claim, so it’s worth looking into.
As of 2021, some medical expenses can be deducted from your taxes, provided they were paid for in full the same year taxes are filed. In general, you can as much as 16 cents per mile traveled for medical reasons like doctor’s appointments.
For self-employed people, you can deduct 100% of your health insurance premiums for yourself, your spouse, and your dependents under 27, provided none of those people are eligible for health insurance through their workplace.
Now that you know about these simple tax deductions that you can take advantage of at the end of this year, you’re ready for when tax season comes around again! Just keep in mind that while only some of these deductions may be helpful to you, there are many more to take advantage of with some research or help from a tax preparation professional.
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