Are you looking for a way to decrease your taxable income? Itemized deductions might be the perfect solution for you. Itemized deductions are ways that people can reduce the amount of taxable income they have using expenses they’ve paid for throughout the year. Here are some of the most common itemized tax deductions for which you may be eligible.
Home Mortgage Interest
Yes, that’s right! Home mortgage interest can be used as an itemized tax deduction. Most people qualify for this deduction because it’s allowed on the first $1,000,000 borrowed on a mortgage. If you’re married and filing separately, the limit is $500,000. The deduction can be applied for up to two residences per taxpayer, and you can also deduct interest on a home equity loan.
Property, State, and Local Income Tax
The point of tax season is that you pay money on income that wasn’t taxed properly. However, if you’ve paid state or local income during the year, then you can use this amount as an itemized tax deduction. Additionally, if you own your home, you can deduct any paid real estate taxes you paid before tax season. You cannot deduct any prepaid taxes, but only taxes that were allocated to you in the year for which you’re filing taxes.
Investment Interest Expense
Investing isn’t a cheap endeavor. You’ll have to pay broker or advisor fees, a safe deposit box fee, and other things that can cost quite a bit. Fortunately, you can deduct these as itemized tax deductions. You can only deduct a certain amount, so be careful, or you may find yourself in an audit. Keep in mind that you can only deduct up to the amount you earned through investments.
Medical Expenses
Medical expenses seem to increase every year, but did you know that you can use them as an itemized tax deduction? The IRS allows you to deduct medical expenses on your taxes that are more than 10% of your adjusted gross income. Taxpayers who are 65 or older can still use the previous 7.5% threshold. This can include travel expenses to and from medical treatments, uninsured medical treatments, insurance payments from already-taxed income, and more.
Charitable Donations
Many people may already know that you can deduct charitable donations as itemized tax deductions. Tithing to your church, contributing to a non-profit organization, and other such charitable gifts can be considered a deduction as the groups are qualified. If you aren’t sure whether or not the organization is qualified, you can contact the IRS and ask. Above all, you need to remember to get a receipt for the donation to present to your tax professional.
Miscellaneous Deductions
There are a number of smaller deductions that are quite popular but don’t fit any of these categories including unreimbursed business expenses, qualified educational expenses, expenses for uniforms, tax preparation fees, business use of your home, subscriptions to professional journals, and job-hunting expenses. If you are unsure whether you can use an expense as an itemized tax deduction, you can ask a tax professional who would be more than happy to walk you through the process.
