Ontario Independent

Tuesday, November 28, 2023

What are some tax deductions I should be aware of

Taxes are a necessary evil in modern society, but they don’t have to be as daunting as they seem. One way to reduce the amount of taxes you owe is to take advantage of tax deductions. A tax deduction is a reduction in taxable income that lowers the amount of taxes you owe. There are many tax deductions available, and it’s important to be aware of them so you can maximize your savings. In this article, we’ll explore some tax deductions you should be aware of.

  1. Charitable donations

Donating to a qualified charitable organization can be a great way to give back to your community and lower your tax bill. You can deduct the value of your donations on your tax return, as long as you have proof of the donation. Be sure to keep receipts or other documentation to support your deduction.

  1. Home office deduction

If you work from home, you may be able to deduct expenses related to your home office, such as rent, utilities, and internet. To qualify for this deduction, your home office must be used exclusively for work purposes, and it must be your primary place of business. Keep in mind that this deduction is only available to self-employed individuals, not employees.

  1. State and local taxes

You can deduct state and local income, sales, and property taxes on your federal tax return. This deduction is especially valuable for individuals who live in high-tax states like California or New York. However, the Tax Cuts and Jobs Act of 2017 limited the total amount of state and local tax deductions you can claim to $10,000.

  1. Retirement contributions

Contributing to a retirement account like a 401(k) or IRA can lower your taxable income and save you money on taxes. You can deduct contributions to a traditional IRA on your tax return, up to a certain limit. Contributions to a 401(k) are deducted from your paycheck before taxes, so you don’t need to worry about claiming the deduction on your tax return.

  1. Medical and dental expenses

You can deduct medical and dental expenses that exceed 7.5% of your adjusted gross income. This includes expenses like doctor’s visits, prescription medications, and medical equipment. Keep in mind that this deduction is only available if you itemize your deductions, and it’s only available for expenses that weren’t covered by insurance.

  1. Student loan interest

If you’re paying off student loans, you may be able to deduct the interest on your tax return. You can deduct up to $2,500 in student loan interest per year, as long as you meet certain income requirements. This deduction is available even if you don’t itemize your deductions.

  1. Job search expenses

If you’re looking for a job in the same field, you may be able to deduct expenses like travel, lodging, and resume preparation. To qualify for this deduction, your job search must be for a new job in your current field, and you must be looking for a job that’s similar to your previous job.

In conclusion, there are many tax deductions available that can help you save money on your tax bill. Charitable donations, home office expenses, state and local taxes, retirement contributions, medical and dental expenses, student loan interest, and job search expenses are just a few examples of deductions you should be aware of. To take advantage of these deductions, be sure to keep good records and consult with a tax professional if you have any questions

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