As a taxpayer, it’s essential to take advantage of every possible tax deduction to lower your tax bill. However, it can be challenging to identify and understand which deductions you are eligible for. In this post, we will go over some common US tax deductions for individuals that can help you reduce your taxable income.
- Charitable Contributions
If you made donations to a qualified charitable organization, you may be eligible to deduct the amount from your taxable income. You can deduct cash donations, property donations, and even mileage expenses incurred while volunteering. However, it’s essential to keep proper documentation of your contributions, including receipts and acknowledgment letters from the charity.
- State and Local Taxes
If you paid state and local taxes, including income, property, and sales taxes, you can claim them as itemized deductions on your federal tax return. However, keep in mind that there is a $10,000 limit on the total amount of state and local taxes you can deduct.
- Mortgage Interest
If you own a home and have a mortgage, you can deduct the interest you paid on your mortgage. However, there are limits on the amount you can deduct, depending on when you took out the mortgage and the size of the loan.
- Medical and Dental Expenses
If you had significant medical or dental expenses that weren’t covered by insurance, you may be eligible to deduct them from your taxable income. However, you can only deduct expenses that exceed 7.5% of your adjusted gross income (AGI) for the year.
- Education Expenses
If you paid for higher education expenses, such as tuition and fees, you may be eligible for tax deductions. The American Opportunity Tax Credit (AOTC) and Lifetime Learning Credit are two tax credits that can help offset your education expenses.
- Retirement Contributions
Contributing to a retirement account, such as a traditional IRA or 401(k), can lower your taxable income. You can deduct up to a certain amount of your contributions, depending on your income level and the type of retirement account.
- Job-Related Expenses
If you incurred expenses related to your job that weren’t reimbursed by your employer, you may be able to deduct them from your taxable income. However, the expenses must be necessary for your job and exceed 2% of your AGI.
In conclusion, these are some of the common US tax deductions for individuals that can help you lower your tax bill. However, keep in mind that tax laws can be complicated, and it’s essential to consult a tax professional to ensure that you are taking advantage of all the deductions you are eligible for.
If you need help with your US tax accounting, contact JTT Accounting, a Toronto-based accounting team that specializes in US tax services. We have extensive experience in helping individuals and businesses navigate the complex US tax system. Contact us today to learn more about our services.