It is tax season again. Time to calculate your income and deductions so that you can see how much you are going to owe or how much money will be refunded to you. People that choose not to pay a professional tax preparer to calculate their taxes for them may be missing out on some important deductions that they do not know that they qualify for. Not taking all of the deductions that you are entitled to is like giving the federal government free money. Here are some good tax deductions to take if you find that you qualify for the deduction.
Charitable Contribution Deductions
If you have given money or goods to a qualified charity during the last calendar year, you may be able to claim the amount as a deduction on your taxes. In order to qualify, the charitable contribution must have been made to a qualified organization as determined by the federal government. Many people do not know the true value of the contributions that they have given to charity if the contribution was not made in cash and often undervalue the contribution. These non-cash contributions include used goods, mileage driven while volunteering, and anything purchased to help the charity. These items are valued at fair market value and the charity will generally give you a receipt as proof that the contribution was made.
Retirement Savings Credits
Many people do not know that you can get an extra tax break for saving for retirement. Low and middle income individuals can take a tax credit worth up to $1,000 for making tax-deferred contributions to a qualified retirement account. Qualified accounts include individual retirement accounts (IRAs), Roth IRAs and workplace retirement plans such as 401(k)’s and 403(b)’s. The credit equals up to half of the first $2,000 made in retirement contributions, but the credit phases out as the amount of income earned increases. The income limits are $28,250 for single filers, $42,375 for those filing as head of household, and $56,500 for married couples filing jointly.
Medical Expense Deductions
Medical expenses in excess of 7.5% of your adjusted gross income may qualify for a medical expense deduction on your tax return. There are many things that can be qualified expenses that go towards that total, including out-of-pocket costs for doctor visits, hospital stays and prescription drugs, fees for weight-loss and smoking-cessation programs prescribed by your doctor, and transportation costs such as mileage, tolls, and parking. Be sure to review the requirements for a qualified expense before taking the deduction to ensure you are calculating everything correctly.