Maximize Your Own Tax Deductions

Being savvy about your own taxes requires having a plan in place early in the fiscal year to minimize your individual tax liability.  A large part of your plan will include which deductions to take to have a minimal taxable income. 

Medical Expenses

Medical expenses may be claimed as a deduction.  However, most people do not claim medical expenses because the total claimed amount must be at least 7.5% of the adjusted gross income, or AGI.  There are multiple ways to contribute in order to reach this required minimum threshold that are not always obvious.  For example, any insurance payments that are made from after tax income may be included.  Additionally, items such as contact lens and eyeglasses not covered by any insurance plan and are not paid for with a pre-tax medical spending account, may contribute to the required threshold amount for medical expenses.  

Local and State Taxes

In the case that your state has an income tax, the state income tax you pay may be claimed as a deduction on your federal tax return.  Other taxes that you are required to pay may also be deducted on your return, such as taxes on investments, personal property, some disability, and real estate.  Also, paid sales tax may be written-off.      

Mortgage Interest

Are you paying on a home loan?  Any interest that you pay on your mortgage may be used as a deduction on your tax return.  Also, if you own a secondary residence that is for personal use, you are able to deduct the interest paid into that loan as well.  For any new mortgage, the loan fees may also be deducted, even in the case where the seller actually paid the fees.  However, also be sure that you have the documentation that supports taken it as a deduction. 

Charitable Contributions

You are probably already aware that you are able to take any contributions given to a charity as a deduction.  Donations of this nature that may be deducted include cash and physical goods.  However, were you aware that there are a number deductible of non-cash contributions?  It might surprise you to learn that when you drive a your own car to perform volunteer work, you may deduct the a standard mileage rate of $0.14 per mile.  This rate is set by the government, and may increase in the future.  You are also able to deduct the maintenance cost for a uniform, if you are required to wear one while performing volunteer services.  It is important to remember that if any charitable contribution is over $250, you must obtain a statement for your records from the charitable organization.          

Educational Expenses

Any educational expenses that you have paid related to your career may be deducted on your on tax return.  The education should maintain or increase the skills necessary in your present position, or it must be necessary to stay at your present position, status, or salary.  The maximum dollar amount that may be deducted is limited to 2% of your unadjusted gross income.