Save with Standard Tax Deductions and Itemized Tax Deductions

Tax Deductions: What Are They & How to Use Them

getting expert help with your IRS tax deductions made easyTax deductions can be difficult to understand. You may have questions about the tax deductions you file every year such as:

  • Why was I able to file for certain tax deductions last year but not this year?
  • Why are my standard tax deductions greater than my itemized tax deductions?

We will cover these questions and more about tax deductions, and hopefully give you a good starting point when filing IRS taxes next year.

What are Tax Deductions?

Tax deductions help lower your taxable income, allowing you to receive a bigger refund or pay less taxes when you file your federal income taxes. Deductions are subtracted from your overall income, which can put you in a new income bracket and open even more tax deductions for you to claim. American taxpayers have the choice to claim the flat standard deduction or to itemize their deductions.

  • Standard Deduction: This fixed dollar amount is what the federal government allows individuals to claim based on their filing status and age. Other factors include if the person is blind or is claimed as a dependent.
  • Itemized Deductions: Some taxpayers find it more beneficial to itemize their tax deductions for items such as medical expenses, state property tax, mortgage interest payments and charitable gifts. If these tax deductions total to more than the standard deduction, then filing with itemized tax deductions is what you should do.

Why do my tax deductions change?

There are many factors that can affect why your tax deductions change from one year to the next.

  • Filing Status: Did you recently get married? If so, congratulations, but you are now in a different filing status, and with that comes a different standard deduction and more taxable income. Also, if you are now divorced or married but filing separately, your standard deduction will change. If a little bundle of joy was born during the tax year, you now have a dependent that will bring additional tax deductions.
  • Age: When you become 65 or older, your standard deduction changes.
  • Blindness: This disability allows for a greater standard deduction.

How do I make the most of my tax deductions?

For people trying to decide whether to take the standard deduction or itemize, consider these most overlooked tax deductions and see if you are missing any.

  • Charitable Deductions: Make sure you get a receipt if you donate to any charity, even Goodwill or the Salvation Army.
  • Health Insurance Premiums: We all know health insurance premiums are skyrocketing, so if during the year your medical expenses exceed 7.5% of your AGI (adjusted growth income), go ahead and deduct these expenses.
  • Education Expenses: As an educator you can get the maximum tax deductions of $250 for education materials and supplies you personally purchased for the classroom. As a student, you are able to take tax deductions for up to $4000 for any higher-education expenses you paid through the year. There is also the American Opportunity Credit for undergraduates and the Lifetime Learning Credit for post-grad work. Understand you cannot claim both the education deductions and credits, so choose wisely!

It is important to understand tax deductions; what they are, how they work, and what you are eligible for. Claiming too many tax deductions could land you in hot water, potentially bringing on an IRS audit or worse, a tax debt.

If you have tax debt because of too many tax deductions or credits and are looking for expert tax advice, fill out the form or call the number above for a free IRS tax debt consultation. We can discuss the deductions that you claimed and a course of action to get your back tax issue resolved today. There is no reason to live with tax debt because of false tax deductions.

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