First of all, I would like to remind you the difference between a tax deduction and a tax credit. A tax deduction cuts the amount of income you’re taxed on, and a credit cuts your tax bill directly. Now that we’ve got that figured out, let’s look at the top tax deductions most people can use:
- Business Expenses – If you’re running a business, there are certain expenses you can write off, just click that link!
- Student Loan Interest – Who doesn’t have these nowadays?! If you paid off a certain amount and have an AGI (Adjusted Gross Income) under a certain amount, you may be able to deduct up to $2,500 of that interest! Check this link to see if your payments qualify.
- Mortgage Interest – How. Exciting! Note that you will have to itemize your deductions if you want to write this interest off. You can’t claim the standard deduction. You can actually write off the interest you pay on the first $750,000 of your mortgage ($375,000 if married and filing separately) if you purchased your home between December 16, 2017 and January 1, 2026. If you bought your home previous to that date, you can deduct the interest you paid on up to $1 million ($500,000 if married filing separately) of your mortgage.
- Medical and Dental Expenses – You will also have to itemize your deductions in order to write off these expenses, but if they exceed 10% of your AGI, they are deductible! And almost ALL medical and dental expenses fall under this category. Check right here to see what you can and can’t write off.
- Charitable Contributions – It literally pays to give back! Again, you’re going to have to itemize your deductions for this one. Almost every penny you have donated can be deducted. You will need proof of these from whomever you donated to, so make sure you get receipts! You can find more information on this deduction right here.
- Traditional IRA Contributions – You don’t have to itemize your deductions for this one, which makes everything so much easier. If you’ve saved money in a traditional IRA you may be able to deduct up to $6,000 ($7,000 if you’re over 50 years of age) and also have an AGI under a certain amount. Click here to see your limits.
- HSA Contributions – If you had a Health Savings Account in 2019, you may be able to deduct what you put in. Here is a great article about HSA’s and the write offs.
Friendly Reminder that the deadline to file your taxes is April 15, 2020! Hopefully these deductions will make it a little easier to do!