This is a guest post by Kreig Mitchell, a Houston Tax Attorney who provides thoughtful and experienced advocacy on behalf of clients in federal and state tax planning and disputes nationwide. He also handles disputes with the IRS and state tax authorities for both businesses and individuals. He has represented businesses ranging from entrepreneurs to multinational corporations, in industries such as high technology, manufacturing, oil and gas, and government contracting.
The only thing permanent in this world is taxes, as the famous saying goes.
Let’s be honest here- no one actually likes paying taxes. But we still do it because it is our duty as citizens to do so.
The whole tax process can be confusing, confounding, and tedious. However, there are some things that you can do which would make the whole thing a lot more bearable (and most of all, less expensive).
The Tax Deductions You Might Be Overlooking
The key here is to learn and take advantage of the tax laws that can benefit you (believe it, there are many).
Be aware of every tax deduction that you can avail and use it. It might take some time to sort through all of this information (detailed info about tax deductions is available on the IRS website), but you’ll be able to save A LOT on your tax bills so it’s going to be all worth it in the end.
At any rate, here are some of the easy ways to which you can get your tax bills reduced:
1. Deduct Home Office Expenses.
If you work remotely or have another side-business that is home-based, you are eligible for home office deductions.
Under the law, you can legally deduct the percentage of your house expenses that you are using as an office.
For example, if your home office takes up about one-fourth of your house, then you are free to deduct one-fourth of your total utility bills (and rent, if you’re paying any) from your taxes.
2. Give to Charity.
Altruism always pays off. You can get a write-off for 50% of what you give to charity every year (subject to limitations, gifts to charity is deductible).
Just make sure that you’re able to keep track of the charity gifts that you make during the year so that you have valid documentation when tax deductions time comes.
3. Stash Your Money in a Retirement Fund.
All the contributions that you make towards a 401(k) will not be included in your taxable income.
Up to $18,000 can be deducted through this method, and this can go up to $24,000 if you are aged fifty or older.
4. Try to Get a Health Tax Break.
See if you employer offers something called a flex plan, which is another name for a medical reimbursement account.
Just like with the retirement fund, having a flex plan allows you to stash away part of your salary to an account that you can be used for medical bills and won’t be taxable.
The maximum that you can deduct from your taxable income through this method is $2,700.
Another advantage of having your money in a medical reimbursement account includes not having to pay both income AND Social Security tax on the money.
5. Deduct Your Educational Costs.
If you’re currently paying for college, you can get up to $2,500 off your tax bill for four years through the American Opportunity Credit.
You must be enrolled in an eligible post-secondary program for you to qualify for this deduction. This is available for single filers with an adjusted gross income of $65,000 ($130,000 for joint filers).
There’s also a program called Lifetime Learning credit that you can use to deduct up to $2,000 from your taxable income if you’re not eligible for the tax deductions mentioned above.
6. Combine Your Vacation Times With a Business Trip.
Merge your business trips with your holidays.
Not only do you get to decrease the cost you spent on your holidays, but you also get to save on taxes too. Just subtract the amount of the reimbursed business expenses from your total vacation bill.
7. Get All The Deductions When You’re Self-Employed.
If you’re self-employed, then you’re in luck. You are eligible for tax deductions that go into the running of your business.
This can include everything from website fees, home internet bills, supplies, electricity bills, advertising fees, subscriptions, business trips, and any other thing that you spent on while working from home.
This applies to all those who are self-employed- full time or part time.
Here are some bookkeeping tips for you if you’re working for yourself.
8. Reimburse Your Vehicle Expenses.
Yes, you can get tax deducations on your vehicle too. This is something that is commonly overlooked by most taxpayers.
If you’re using your personal car for business purposes, you may be able to deduct mileage costs from your taxes.
9. Deduct Your Student Loans.
You are able to deduct up to $2.500 if you’re still paying for your student loans.
This is available for single filers with $60,000 in adjusted gross income (120,000 for joint filers).
What do you think about the 9 tax deductions listed above? Which ones apply to your situation and how can you start saving money today?