9 crucial tax deductions - Erie News Now | WICU & WSEE in Erie, PA

9 crucial tax deductions

© iStockphoto.com/JannHuizenga © iStockphoto.com/JannHuizenga


Like most Americans, you probably want to get through your taxes as quickly as possible. However, do not rush through your return so quickly that you simply take the standard deduction and ignore deductions that can bring you a healthy refund. Consider these commonly overlooked tax deductions. For the 2018 tax year, fewer of us will itemize, and those who do may find fewer deductions available due to the Tax Cuts and Jobs Act of 2017 (TCJA).

1. Charitable Contributions You may not feel that you give enough to charity for it to matter, but every little bit helps when itemizing deductions. Any gift to a qualifying charitable organization may be deducted. The IRS website has an online search tool to verify qualified status of any organization, but the receiving organization should be able to provide you with proof. For tax year 2017, you may deduct donations worth up to 50% of your income. Starting in 2018, this cap will be raised to 60% per the TCJA.

Make sure that you have written receipts or bank/payroll deductions for any contributions. Any non-cash donations such as clothing have to be deducted at fair market value. If your non-cash deductions are over $500 for the year, you must submit IRS Form 8283 with your taxes to claim your deduction. See IRS Publication 526, "Charitable Contributions", for further details.

2. Retirement Plan Contributions Contributions to traditional IRAs and Simplified Employee Pension plans (SEPs) may be deductible. Roth IRA contributions are not deductible because they are made with after-tax dollars. You can still make contributions up to the tax filing date and apply them to the previous tax year as long as your total contributions are below the annual limits. See IRS Publication 590-A, "Contributions to Individual Retirement Arrangements," for details. The TCJA did not change this deduction.

3. Mortgage Interest, Points, and Insurance The annual interest on your mortgage is deductible, along with any points paid on a new home to lower your interest rate. Generally, deductions for points must be spread out over the life of a loan, but there are a few exceptions that allow total deduction in the year of purchase. Further information is available in IRS Publication 936, "Home Mortgage Interest Deduction." Interest on mortgage debt of up to $1 million can be deducted for home loans taken before or on December 15, 2017, and mortgages of up to $750,000 taken after that date. Mortgage insurance premiums also qualify under the mortgage interest deduction through tax year 2017, but they are subject to phase-out beginning at $100,000 AGI (for married filing jointly status).

4. State and Local Taxes Various state and local taxes paid in 2017 can be deducted, either as income taxes or sales taxes paid (but not both). Generally, state income tax is higher, but not all states have an income tax. If you choose to deduct sales taxes, use the relevant tables in the Schedule A instructions to determine a baseline deduction amount, and then add the sales tax component of any big-ticket items purchased. Starting in 2018, the TCJA limits the total deductible amount of income, sales, and property taxes to $10,000.

5. Personal Property Taxes You can deduct any personal property taxes that are paid on items such as automobiles or boats as long as the taxes are imposed annually and based on the value of the asset. Starting in 2018, this will also fall under the $10,000 limit for income, sales, and property taxes per the TCJA.

6. Job Search Expenses Some job-hunting costs can be deducted if you are looking for a job within your occupation with no time break between the job search and your previous job. Things like transportation costs with associated food and hotel bills, resume printing costs, and employment agency fees are deductible in that case. The TCJA has eliminated this deduction beginning in 2018.

7. Moving Expenses If you get that new job, you can deduct moving expenses as long as your new job is at least fifty miles farther from your old home than your old home was from your old workplace (or from your old home if you had no prior job). This deduction is especially valuable since it is an "above-the-line deduction" that directly lowers your AGI. You can take the deduction whether or not you itemize. You can take the deduction for 2017 whether or not you itemize, but for the last time this year until the TCJA sunsets in 2026. However, this deduction will remain in place for those in active duty in the armed forces throughout the lifetime of the TCJA.

8. Medical and Dental Expenses Any unreimbursed medical and dental expenses over 7.5% of your Adjusted Gross Income (AGI) may be deducted. For example, with an AGI of $50,000, you can deduct the portion of your medical expenses that exceeds $3,750. In tax year 2019, the TCJA increases this threshold to 10% of your AGI.

9. Self-Employment Expenses If you work for yourself, you can deduct 50% of your payroll taxes essentially the "employer" portion of your taxes. In certain cases, you may also deduct retirement contributions and health insurance expenses, as well as some household expenses if you have a home office.

Maximize your Tax Refund

Take the time to look over these and other potential tax deductions. They could be the difference between a good refund and a great one.

Get your Refund Fast and File your Taxes for Free.

Photo iStockphoto.com/JannHuizenga

Originally Posted at: https://www.moneytips.com/9-crucial-tax-deductions

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