Filing your taxes is a pretty complicated process and it seems to get more difficult each year. Whether you are preparing your tax return using a software program like TurboTax or filling out the tax forms by hand it is important to know the rules.
When filing your taxes this year, don’t forget about the income tax deductions you can claim. Using these common tax deductions is an easy way to help you reduce your taxable income. It could also place you in a lower tax bracket. Either way you can save some money which is always a great thing.
Each person filing taxes must either choose the standard deduction or itemize their deductions. The idea is to use the method that gives you the most deductions and the lowest amount of taxes.
The standard deduction is a common tax deduction that is a flat dollar amount which reduces the filer’s taxable income. This deduction varies by a person’s age, filing status, and certain disabilities.
Here are some income tax deductions you need to know
- If you have children (dependents), you may qualify for the Child Tax Credit. This can be found on Form 1040, Line 51.
- Alimony payments are a tax deduction for the person paying it and taxable income for the recipient. Alimony paid is reported on Form 1040, Line 31 and alimony received is reported on Form 1040, Line 11.
- Tuition and fees deduction is a tax deduction for anyone who paid college tuition and other mandatory school fees during the tax year. These deductions are reported on Form 1040 and 1040A. 2009 is scheduled to be the last year for this deduction. Another deduction similar to these are the Hope or Lifetime Learning tax credits for those who paid college tuition.
- If you paid interest on a student loan, there is a tax deduction found in the “adjustments to income” section of Form 1040 or 1040A. You can claim up to $2,500 in interest on this deduction. You are able to take this deduction even if you didn’t choose to itemize or in addition to any other itemized deductions.
- The Retirement Savings Tax Credit is available to all those who contributed to a retirement plan. This is found on Form 1040, Line 50 and on Form 8880.
- If you donated money or property to a qualified non-profit organization, then that is a tax deductible contribution. Ask for a receipt, or keep records on your own, especially for donations over $250. If donating property, keep records that indicate the value of the property and the condition it was in when given to the charitable organization.
- Car and truck expenses are tax deductible if your car or truck is driven for business, medical or charitable uses.
- Casualty, disaster and theft losses may be tax deductible as well. These losses are reported on Form 4684 and Form 1040.
Each deduction has its own restrictions and instructions. If you don’t understand how to apply the deductions to your specific needs, consult a tax advisor. There are some tax advisors that offer free services (if you qualify, usually based on income). Tax software such as TurboTax will help you find deductions that you might not have known qualified for. Even if you pay for your taxes to be done by an accountant, it is generally well worth the money you save with their knowledge on applying these deductions and credits properly.
Please keep in mind that this article is not meant to be advice. There could be plenty of other tax deductions available for you as well.