Paying taxes is one of the least favorite activities of the average American, but if you are not taking advantage of all the tax deductions available to you, it is almost certain that you are paying more than you need to. This guide will explain some of the most essential deductions and how you can qualify for them.
1. State Tax Deductions
State income taxes can be deducted from your federal income taxes if you had to pay the previous year, but in states like Texas, where there is no state income tax, state sales taxes can be deducted instead. This can be based on actual receipts that you have collected throughout the year, or you can use a handy table that the IRS provides to estimate the amount you can deduct. Like most of these credits, this requires that you itemize your deductions, and the maximum deduction is limited to $10,000.
2. IRA Contributions
Retirement planning is essential to be comfortable later in life, and if you choose to invest in a traditional IRA, those contributions can be tax deductible whether you itemize or not. But if you or your spouse contributes to a 401k or you are above certain income thresholds, that IRA deduction may be reduced or eliminated.
3. Health Savings Account Contributions
If you have a high-deductible healthcare plan, you can contribute to a health savings account to help cover some of the medical costs that are not covered under the plan. These contributions can also be deductible, and like the IRA tax deductions, this is possible whether you itemize or not. Annual health savings account contributions are limited to $4,150 for individuals or $8,300 for married couples, and those over 55 can contribute an extra $1,000 per year.
4. Medical Expenses
If you find yourself unexpectedly injured or ill, you may be able to deduct your medical costs and any other expenses related to your medical care, such as travel, hotel stays, medical supplies, and more. You can qualify for this deduction if the medical expenses add up to over 7.5% of your taxable income, but this deduction is only available if you itemize.
5. Mortgage Interest
Owning a home can be quite rewarding, but the interest costs can add up over time. The good news is that these are deductible, as long as you itemize. If you took out your mortgage prior to December 16, 2017, you can claim mortgage interest equivalent to the first million dollars of principal. For loans initiated after this date, the amount falls to $750,000.
6. Charitable Contributions
If you do not itemize, single filers can claim up to $300 dollars in charitable contributions if you donated to a 501(c)(3) organization in the prior year, and married couples filing jointly can claim up to $600. This is on top of the standard deduction. If you itemize, you can also deduct any cash expenses, as well as travel expenses of up to 14 cents a mile for any volunteer work that you did.
Tax Preparation Services in Dallas, Texas
Need help determining which tax deductions you qualify for? Talk to our team at Gurian CPA. We offer complete tax planning and preparation services, and we have the knowledge and expertise you need to keep your tax liabilities to a minimum. We also offer full business accounting services, tax services, payroll services, and more, and we work with clients throughout Dallas and Houston.
To schedule a tax consultation with our team at Gurian CPA, call (469) 306-9866 today.
