As tax season draws nearer, many of us begin to think about what counts as a deduction. Below is a list of tax deductions that you may not realize you could possibly have.
Interest payments on a mortgage can often be expensive, especially early on in your loan. To help make ownership more affordable, the federal government introduced this deduction which can help to reduce your AGI.
For those who use part of their home exclusively for conducting business, the IRS allows a deduction for a portion of the costs. There are several methods the IRS provides for a deduction; be sure to keep accurate records, as these will be needed. Contact Perfect Balance to see which option is right for you.
Student Loan Interest
If you have student loans and made interest payments in 2021, you may be able to deduct a portion from your taxable income. Income limits do apply, and the benefit begins phasing out as your income increases. It is important to mention that if the loan is in your name, but you are reported as a dependent on a parent’s taxes, then the deduction is not available.
For school teachers or other types of qualified educators, funds to cover classroom and other school supplies often come out of their own pockets. If you are an educator, you should be able to deduct a portion of these expenses.
Charitable Contributions Tax
Contributions of cash or property to a qualified tax-exempt organization may be deductible. To receive a benefit, you will need to itemize your contributions. Be sure to keep any related receipts or documentation that you receive from the benefiting organization throughout the year. For gifts greater than $250, you will need a letter of acknowledgement from the charity.
Health Savings Account Contributions
For individuals and families who participate in high-deductible health coverage, health savings accounts offer an opportunity to set aside dedicated funds for out-of-pocket costs. Contributions are tax-deductible and are tax-free upon withdrawal, if used for qualified medical expenses.
If you have significant unreimbursed medical expenses, you may be able to take them as deductions. As with any other deductions, be sure to keep all documentation should questions arise. Check with one of our accountants to see what expenses qualify.
State and Local Tax
For residents that reside in high income tax states or high property tax states, the federal government offers some relief by allowing deductions for a combination of state and local taxes. Taxes could include those levied on property, income or sales.
Some taxpayers may be able to claim a deduction for contributions to a traditional IRA. However, the deduction is based on whether you or your spouse have a workplace retirement plan and on your income level.
Who would have ever thought that Uncle Sam could be your lucky charm in Vegas? You can deduct gambling losses from your income, but only to the extent of your winnings. For example, if you want to deduct the $100 you spent on lottery tickets to win $100, you will need to report your winnings. Also, you cannot deduct more than you win.
Tax rules change every year, so be sure to contact Perfect Balance and consult with one of our extremely knowledgeable accountants before filing your 2021 tax return.