A lot of people are under the impression that taxes are a necessary evil deduction that they can’t negotiate with. The truth is that there are numerous ways that can help you reduce that tax burden without compromising anything. Over 1.2$ trillion of itemized tax deductions were made in 2018 alone, which means that anyone can get a piece of the pie if they calculate it right. Itemized deductions give the average Joe the opportunity to bring more money back to their home, especially those who need it. From work-related expenses to homeownership, there are many effortless ways that you can secure some juicy deductions with. We’ll be mentioning the top 6 tax write-offs that you may have overlooked.
Home Ownership
Who thought that owning a home could give you some hefty tax deductions every year? You can also get points depending on the date of buying the house and even some write-offs on the mortgage interest. If you paid property taxes, you can get deductions as well. It’s worth mentioning that homes bought after Dec 15, 2017, are subject to a new tax law that states that you can only deduct interest on loan amounts up to $750,000, previously $1 million.
Taxpayers are entitled to a deduction of $10,000, $5,000 if married, for both state and local taxes; this includes property taxes, income tax, and sales tax. Owning the house isn’t the only thing that can get you write-offs; selling your home also provides you with considerable tax benefits. Property taxes and mortgage interest that you’ve paid for the house are all taken into consideration as you deduct. If you’re in the military, you can also add on your moving expenses to the deductions. Most fees you pay for are also added, such as unloading the house, real estate commissions, and closing fees. Since these are deducted from the sale price, it will help lower your capital gains tax.
Automatic Tax-Based Monitoring
There are dozens of ways that you can use to get some sweet tax deductions, but keeping up with all of them isn’t really that easy. The good news is that you can finally use software to monitor your purchases for tax write-offs. If you want to know how such software works, go to Keeper Tax’s website for more information. The short version is that users are assigned to a bookkeeper who monitors their purchases throughout the tax year, providing you with yes/no questions to make it easier to get write-offs.
Miscellaneous Deductions
You’ll find that miscellaneous deductions are one of the most convenient write-offs you could get, with barely exerting any effort. You can get deductions for a magazine or newspaper, in addition to other deductible expenses. As long as you have the receipts for them, you are allowed any amount over 2% of adjusted gross income as a deduction. Keep in mind that these deductions are calculated based on the total, not individual expenses alone.
Small Charitable Donations
While big charitable donations are essentially hard to forget about, the little donations can start adding up too. It’s easy to write-off any charitable donations that you’ve paid out-of-pocket while you were doing charity work. If you’ve been working at a nonprofit soup kitchen, you may have paid for certain ingredients used, so those are considered out-of-pocket charitable donations. Make sure that you keep the receipts. In the case of paying more than $250 as out-of-pocket expenses, you’ll need to get a written acknowledgement from the involved charity to verify the financial support you’ve provided. Even driving the car is taken into account if you calculate the mileage, tolls, and parking fees.
Gambling Losses
Interestingly, you can get yourself some lovely deductions from gambling losses. If you happened to gamble last year, before the whole pandemic thing, you’re allowed to deduct some of your losses. Keep in mind that these deductions must be itemized, and it’s related to the winnings you report from gambling as taxable income. Keep all the gambling receipts, from traditional gambling sessions to lottery and bingo.
Dependents Credit
Most parents are familiar with the child tax credit, which has been quite helpful for many parents. The problem is that it only applies to children under 16. Fortunately, there is a $500 tax credit for parents who don’t qualify for the traditional child tax credit. You’re also allowed to claim the tax credit if you’re caring for older relatives at home.
Instead of paying a big percentage of your hard-earned income as tax, you might want to invest some time to learn how you can circumvent your way out of it with some tax write-offs. There are many methods and filings you can go for, but the ones we mentioned can make the process more straightforward and simpler.