It’s that time of year again, tax season. Although the thought of preparing your taxes can be daunting, if you think about it in terms of tax deductions, you could be shaving off hundreds, if not thousands of dollars of your tax bill.
Few realizations are more painful than realizing that you forgot to include a tax deduction that would have lowered your tax bill or increased your tax refund on your tax return. Here are five (of many) tax deductions that you may be able to take advantage of come April. But it’s best to consult with a Certified Public Accountant (CPA) on your personal circumstances.
- Charitable Contributions
Being generous is a good thing both for yourself and for your taxes. Money (or other assets) that you donate to qualifying charities can be deducted, pending some rules. You’ll need to keep receipts or acknowledgments from the charities for your donations, in case the IRS wants to see them.
- Contributions to Retirement Accounts
You can deduct thousands of dollars from your taxable income if you made big contributions to retirement accounts such as traditional IRAs and 401(k)s. With a traditional IRA or 401(k), you contribute pre-tax money, reducing your taxable income for the year, and thereby reducing your taxes.
- Home Office
If you’re self-employed and have a home office, you may be able to benefit from some deductions, pending some rules. The office in your home must be exclusively used for business. If it’s in a room that you also use as a home gym, or even your bedroom, it doesn’t qualify. The space must also be your principal place of business, or where you meet regularly with customers. Check with a CPA for the detailed list of items you may be able to deduct.
- Health Savings Account Contributions
A Health Savings Account (HSA) works much like a traditional 401(k) retirement account, deduction-wise, as you fund it with pre-tax money, thereby lowering your tax bill. That money can be used tax-free for qualifying healthcare expenses, such as doctor visits, lab work, and eye exams. The money in the account can accumulate over many years, invested and growing. Learn the rules, because an HSA can deliver tax deductions plus potential retirement savings, as well.
- Mortgage Interest
One of the best reasons to be a home owner: the mortgage interest deduction. Most people can deduct most or all of the interest they pay on their mortgage each year, which can add up to a lot of money. Your CPA can detail the rules you need to know.
These are just some of the many tax deductions available to you. Being smart about tax deductions can lower your tax bill significantly. It never hurts to schedule some time with a CPA to go through your taxes thoroughly.
Ward Team at Keller Williams Realty, its affiliates, and their financial professionals do not render tax or legal advice. Always consult with your tax and legal advisors regarding your personal circumstances.