The year is almost over, and most of us are starting to prepare for the upcoming tax season. The Internal Revenue Service has not announced yet when will the tax season officially begin, though. Nevertheless, being prepared for when it does can save us a lot of time and effort when filing our income tax return. Having that in mind, we might want to look at the many tax deductions available that could help us get a lower taxable income.
There are many different types of tax deductions available to us. Each of them, of course, comes with their corresponding requirements. However, we are including 4 useful tax deductions that could help most of you reduce your taxable income. Such deductions include student loans, retirement plans, theft loses, and medical expenses. Here is how you can take advantage of each of them if they apply to you.
Student Loans and Education Expenses
Dealing with student loans, interests, and other education expenses can be quite stressful for many of us. The good thing is that these expenses can qualify as tax deductions we can take advantage of. For the year 2018, you can deduct up to $2,500 in interest on your student loan, as long as you’re not married filing separately.
Your adjusted gross income (AGI) has to be less than $80,000 for taxpayers filing as single, head of household, or qualifying widow. If you’re filing as married filing jointly, the AGI needs to be less than $165,000. Other education expenses include tuition, fees, room and board, books, and other supplies.
Preparing for your retirement is one of the smartest inversions one can make. Even when making contributions to retirement plans might be easier said than done for some, it will eventually payback. These contributions can be tax-deductible and might vary depending on the type of retirement plan you have.
A Simplified Employee Pension plan is for those who work as self-employed. On the other hand, an Individual Retirement Account works for employees and self-employed workers, too.
In order for these contributions to qualify as tax-deductible, they must be after-tax dollar contributions. For example, if you earn $200 and pay $45 in federal taxes, a contribution that comes from the remaining $155 can qualify as deductible.
Casualty and Theft Losses
If we decide to go for an itemized deduction instead of the standard one, we can add the costs of casualty and theft losses to become tax-deductible. This means that if any of our belongings were lost due to theft, vandalism, fires, storms, or can accidents, the expenses of repairing or replacing them are deductible.
In order for these costs to qualify, each loss event has a limit of $100. If we have multiple events, each must attaint to the $100 limit, too. The total of our casualty and theft losses must not include the $100 deduction per event when we calculate it. Also, there will be a reduction of 10% from our AGI before we can get the total amount of deductible expenses.
Medical and Dental Expenses
One of the best and most useful tax deductions we should definitely take advantage of is the one for medical and dental expenses. Keeping track of these expenses might be difficult, especially if we visit our GP and dentist quite often. However, having the patience to go through this definitely comes with some benefits.
In order for your medical bill to qualify as deductible, it must account for 7.5% of your adjusted gross income. Anything below this percentage will not be deductible. This means that if your AGI was $50,000, your yearly medical bill should be of, at least, $3,750.
If you want to know more about these and other tax deductions, don´t hesitate to contact a professional tax advisor. They will be able to help you through the process and give you the guidance you need in order to maximize your deductions.