What can i deduct on my taxes

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What Can I Deduct From My Taxes?

Taxes can be very tricky for those that don’t understand how they work. Luckily, with a little bit of research, you should be able to figure out some basic things you can most likely deduct from your taxes. I’m going to share a few items below, but these only apply to US Federal Income Tax Returns for the year 2013, which is the last year finalized tax forms were published at the time of this writing. Most items are deductible year after year, but the government does make changes every year so make sure to check to be sure once the 2014 tax forms come out. As always, make sure to consult your local tax professional when making any tax decisions.

How To Find Tax Deductions

The best way to find tax deductions is to look at the tax forms themselves. The lines on the forms will give you ideas to research further, which may lead to deductions you can personally take. Look in the instructions of each form to learn the details relating to each deduction. Let’s start by taking a look at Form 1040.

Form 1040

Form 1040 is the standard individual tax return form. Looking down the first page, there are many places where you can take deductions.

Income Section

Contrary to the name of this section, you can actually find deductions in the income section of Form 1040. The first deduction you can take is on line 12 if your business has a loss, rather than a profit. To learn more about business income and losses you’ll need to see Schedule C. The next deduction you can take is on line 13 which is a capital loss. You can learn more about these on Schedule D. Line 14 is for other losses and more information on this can be found on form 4797. If you have rental real estate, partnerships, S corporations or trusts with losses, you may be able to deduct them on line 17. See schedule E for more details.

Adjusted Gross Income Section

This section has many potential deductions, as listed below. Check the instructions of Form 1040 or the schedule/form mentioned for more details on these deductions.

  • Educator expenses (line 23)
  • Certain business expenses of reservists, performing artists, and fee-basis government officials (line 24)
  • Health savings account deduction (line 25)
  • Moving expenses (line 26)
  • Deductible part of self-employment tax (line 27)
  • Self-employed SEP, SIMPLE, and qualified plans (line 28 – these are retirement plans)
  • Self-employed health insurance deduction (line 29)
  • Penalty on early withdrawal of savings (line 30 – PLEASE don’t ever do this!)
  • Alimony paid (line 31)
  • IRA deduction (line 32)
  • Student loan interest deduction (line 33)
  • Tuition and fees (line 34)
  • Domestic production activities deduction (line 35 – very rare)

Taxes and Credits Section

It should be mentioned that deductions and credits aren’t the same

thing. Deductions lower your taxable income on which your income tax is calculated and tax credits actually lower the amount of tax you owe dollar for dollar. In this section, there are both deductions and tax credits. First we’ll discuss deductions followed by tax credits.

  • Itemized deductions OR the standard deduction (line 40). You will choose whichever is larger after adding up all of your itemized deductions. See schedule A and the left margin of Form 1040 for more details.
  • Exemptions (line 42)
  • Foreign tax credit (line 47)
  • Credit for child and dependent care expenses (line 48)
  • Education credits (line 49)
  • Retirement savings contributions credit (line 50)
  • Child tax credit (line 51)
  • Residential energy credits (line 52)

The above covers the deductions and credits that you can take on your basic Form 1040. Next, I’ll discuss potential itemized deductions since many people do end up filing a Schedule A.

Schedule A – Itemized Deductions

If your itemized deductions exceed the amount of the standardized deduction, you should almost always itemize your deductions so that you can have a lower tax bill. Of course, you should consult a professional that can help you with your specific situation. Here’s a list of what deductions are available on Schedule A:

  • Medical and dental expenses (lines 1-4)
  • State and local income taxes OR general sales taxes (lines 5a and 5b)
  • Real estate taxes (line 6)
  • Personal property taxes (line 7)
  • Other taxes (line 8)
  • Home mortgage interest and points (lines 10 through 12)
  • Mortgage insurance premiums (line 13)
  • Investment interest expense (line 14)
  • Gifts to charity by cash or check (line 16)
  • Gifts to charity other than by cash or check (line 17)
  • Casualty or theft losses (line 20)
  • Non-reimbursed employee expenses – job travel, union dues, job education, etc (line 21)
  • Tax preparation fees (line 22)
  • Other expenses – investment, safe deposit box, etc (line 23)

Of course, these deductions are just the beginning of what you can potentially deduct on your tax returns. If you feel like you have a complicated tax situation, definitely talk to a tax professional (or a CPA) and see how they can help you. However, if you just have a W-2 each year, chances are you can do your taxes yourself.

Were you shocked by any of the tax deductions above? Or is your tax situation more complicated and requires a tax professional?

[To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in or accompanying this document, unless otherwise specifically stated, is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter that is contained in or accompanying this document.]

Source: www.feex.com

Category: Taxes

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