When you want to save money during tax season, you need to take advantage of as many deductions as possible. Normally, you’ll hear the term write-off refer to deductions. Some may also use this term to refer to tax credits. Deductions are deductions from taxable income whereas credits are deductions from the tax owed. Not everyone is highly experienced in accounting, so it helps to know the difference and what tax write-offs to look for when tax time comes.
Tax Write-Offs
There are many ways that you can reduce your federal tax obligation. Here are some tax write-offs that you should never overlook.
- Mortgage points
- Property tax
- State income tax
- Sales tax
- Car registration fees
- Childcare
- Earned income tax credit
- Self-employment income
- College tuition and student loan interest
- Noncash charitable giving
- Medical expenses
- IRA and HSA contributions
Property Taxes and Mortgage Points
When it comes to deductions, property taxes are major deductions. While this tax break has a 10,000 dollar cap for state income, property and sales taxes, it’s a tax deduction that you don’t want to lose out on. The mortgage points are paid as part of closing costs on a home sale and can be deducted. One way that you can make sure that you increase your deduction is by consolidating the tax payments. For instance, if you have winter or summer tax bills, you can pay the winter bill in December.
Car Registration Fees
Every state has a different way to assess registration renewal fees. In states where the fee is based on the value of the car, you can usually include the amount that you pay in the itemized deductions. The only requirement is that this fee needs to be assessed annually.
Medical Expenses
If you have medical expenses that exceed 7.5 percent of your adjusted gross income, then you can deduct those expenses. Not only can you deduct the out of pocket costs, but you can also deduct mileage and the travel expenses that coincide with medical visits.
State Income or Sales Tax
Anyone who is an expert in accounting will tell you if you itemize your deductions, then you can also deduct state income or state sales tax payments. In some instances, a state income tax deduction might be a bigger deduction. However,m if you make a large purchase, the sales tax deduction makes more sense.
Tax season is daunting for everyone. If you want to lighten the load of your obligation, then it’s important to take care of the accounting and check out which tax write-offs you can take advantage of this year.