5 Top Tax Deductions for IndividualsPublicado:
Don’t Miss Out on Deductions That Reduce Your Income Tax Liability
One of the best ways to reduce your income tax liability (and possibly increase your reembolso de impuestos) is through federal tax deductions provided by the IRS.
There are certain expenses that are considered tax-deductible, meaning they can be applied toward your gross income and reduce the amount of your ingresos sujetos a impuestos. Knowing what tax deductions you qualify for can help decrease your annual tax liability and, in many cases, garner you a larger tax refund.
Here are 5 deducciones fiscales that individual taxpayers can use to lower their income tax burden:
Deducting State and Local Taxes
The state and/or local taxes that you pay throughout the year may be deductible on your federal tax return. You can deduct either the state/local income taxes (that’s withheld from your paychecks) or the state/locally-imposed general sales tax on retail items, but not both. If there is no state income tax where you live, the sales tax option would obviously be the one you chose to deduct. However, in states with both income tax and sales tax, you will want to calculate which is the highest, and then use that amount for the deduction on your tax return.
The IRS provides an optional sales tax table that gives you a standard sales tax deduction amount based on your income, or you can keep all your receipts and add up the exact total you paid in sales tax to determine your deduction amount. Your state/local tax deduction amount (for income taxes, sales taxes, and/or property taxes) is limited to a combined total of $10,000 (or $5,000 if married filing separately).
Note that non-business taxes can only be claimed as an itemized deduction and must be reported on Schedule A, Form 1040 or Form 1040-SR (Itemized Deductions).
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Tax Deduction for Charitable Contributions
If you donate money or property to a qualified charitable organization, your contributions may be deductible on your federal income tax return. You can deduct cash contributions as well as the value of donated items. Generally, for cash donations, you can deduct up to 60% of your Adjusted Gross Income (AGI). However, for tax year 2020, individuals can deduct qualified cash contributions of up to 100% of their AGI.
Usually, you are only allowed to deduct charitable contributions if you itemize deductions on Schedule A (Form 1040 or Form 1040-SR). For tax year 2020, however, individuals are allowed to deduct up to $300 from gross income for their qualified cash charitable contributions without having to itemize deductions.
While donating your time is not deductible, any expenses that you pay out-of-pocket may be eligible for the deduction (including gas, cooking ingredients, or postage). Note that any charitable contributions over $250 will require proof, usually in the form of acknowledgment from the charitable organization (such as a receipt). For more information, please refer to IRS Publication 526 (Charitable Contributions).
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Tax-Deductible Interest Expenses
In general, you cannot deduct personal interest on your income tax return. However, you are allowed to deduct interest that you paid on certain debts (including student loans and home mortgage loans) as long as you are legally liable for the debt. For those with large mortgages or high-interest loans, this can be a big tax savings help. In order to deduct mortgage interest, you must itemize your deductions. For more information about the home mortgage interest deduction, please refer to IRS Publication 936. Student loan interest, on the other hand, can be deducted whether you itemize or claim the standard deduction. For more information about the student loan interest deduction, please refer to IRS Publication 970 (Tax Benefits for Education).
Tax-Deductible Job Hunting Expenses
If you have been looking for a new job in the same line of work, you may be eligible to claim a deducción fiscal for some of your job-hunting expenses. People who are searching for a job in their present occupation may be able to deduct certain costs — such as résumé creation, transportation, lodging, employment agency fees, and even meals. However, you are not allowed to deduct job-hunting expenses if you’re seeking a job for the first time. Job search expenses are categorized as a miscellaneous itemized deduction. For more information about tax-deductible job-hunting expenses, please refer to IRS Publication 529 (Miscellaneous Deductions).
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IRA Tax Deductions
Money that’s invested into Individual Retirement Arrangements (IRAs) may be deducted on your tax return, depending on the type of IRA you have. Note that Roth IRA contributions are not tax-deductible. However, you may be eligible to deduct the amount you invest into a Traditional IRA. To claim a tax deduction, there are certain qualifications regarding age, marital status, contribution limits, and whether you have a retirement plan through your employer. There are also some new/temporary adjustments for tax-favored withdrawals from IRAs, thanks to recent Coronavirus-related legislation. For more information about IRA deduction limits, please refer to IRS Publication 590-A (Individual Retirement Arrangements).
Every year, a huge number of people miss out on tax deductions and tax credits that could result in big tax savings. It is usually worth the investment to talk to a professional tax adviser to ensure that you’re claiming all the deductions you qualify for. This can reduce your income tax liability or even increase your tax refund.
For more information about tax deductions for individuals, please refer to IRS Publication 17: Your Federal Income Tax (For Individuals).
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