It's possible that you qualify for a tax credit or deduction from the list of twelve below! Prepare yourself now for the upcoming 2023 tax year by reading more below.
Each year, taxpayers have the opportunity to potentially pay less in taxes or even get a refund from the Internal Revenue Service by taking advantage of a wide variety of tax deductions and credits. The following list of twelve common write-offs includes tax credits and deductions that you may be able to claim. Check the website of your state's tax department to see if you are eligible for any write-offs on state taxes.
The 2017 tax law overhaul set a $10,000 limit on the total amount of state and local income taxes (SALT) that can be deducted. Unless extended by Congress, the cap is in place only through the 2025 tax year.
You are eligible to take a tax deduction for the amount of interest that you pay on your mortgage. Mortgage interest paid after December 15, 2017, can be written off, but only up to $750,000 ($375,000 for married people who file separately) of the total mortgage debt.
You are allowed to deduct any state income taxes that you have paid, but the amount that can be written off is capped at $10,000. This cap applies to any and all state and local taxes that are deductible.
If you own a home and pay mortgage insurance premiums, interest on your mortgage, or real estate taxes throughout the year, you may be eligible for a tax deduction.
In most cases, you are allowed to deduct charitable contributions of cash that total up to sixty percent of your adjusted gross income, also known as your AGI. Donations of items or property are also regarded as tax-deductible forms of support for charitable organizations.
Although you can deduct medical and dental costs, the amount you can deduct is limited to the amount that is more than 7.5% of your adjusted gross income.
In order to be eligible to deduct costs associated with medical care on your tax return for the following year (2022), those costs must have been paid in 2022, unless they were charged to a credit card. In these circumstances, you are eligible to take a tax deduction for the expenses in the same year that you charged them to the credit card; it is not necessary that you do so in the same year that you repaid the debt.
Medical mileage can be claimed for travel to and from the doctor's office as well as hospital appointments. Until June 30, 2022, you are eligible to take a deduction of 18 cents per mile for any travel that you do for medical purposes. Beginning on July 1, 2022 and continuing through the end of the year, the rate will be raised to 22 cents per mile.
Tax breaks are available for those who further their education by enrolling in courses at a university, technical college, or trade school thanks to the "lifetime learning credit." Deductible costs are capped at $10,000 per year. Still, the maximum credit per return is $2,000.
The credit can be used to reduce tax obligations by the same amount. You can count on things like college tuition, fees, and books or supplies for yourself, a spouse, or a dependent child. You can apply the credit toward your tax bill, but you won't be able to get a refund on the credit itself. Your tax credit is income-based. To see if your income meets the requirements, check IRS Publication 170.
The American Opportunity Tax Credit provides a tax break for the first four years of higher education. The maximum annual credit per eligible student is $2,500. If you owe no taxes as a result of this credit, the IRS says 40% of any remaining credit amount (up to $1,000) can be refunded to you.
The credit is worth 100% of the first $2,000 in qualified education expenses paid for each eligible student, followed by 25% of the next $2,000 in qualified education expenses. If you, your spouse, or your child are in school, look into education credits. This credit may provide greater tax savings than the lifetime learning credit for students in their first four years of college. Tuition, fee payments, and required books or supplies for post-secondary education for yourself, your spouse, or your dependent child are all qualifying expenses.
When you put money into a retirement plan like a 401(k), a traditional IRA, or a Roth IRA, you can get a tax credit of 50%, 20%, or 10%, depending on how much your adjusted gross income is on Form 1040. Rollover contributions are not eligible for the credit.
The maximum creditable contribution is $2,000 ($4,000 if married and filing jointly), making the maximum possible credit $1,000 ($2,000 if married and filing jointly). The IRS has a chart that can assist you in calculating your credit.
The maximum contribution to a traditional or Roth IRA in 2022 is $6,000, plus an additional $1,000 for people over the age of 50. Traditional IRA contributions are tax deductible.
If you are self-employed, you can deduct 100% of your monthly health insurance premiums for yourself, your spouse, and your dependents, regardless of whether you itemize deductions.
If you have children under the age of 27 by the end of 2022, you can deduct their premiums even if they are not dependents. However, you cannot claim this deduction if you are eligible to participate in an employer-sponsored subsidized health plan for yourself, your spouse, dependents, or children under the age of 27.
The most you can deduct from your taxes is $2,500 worth of student loan interest. The amount you can deduct is determined by your income. For more information, consult the previously mentioned IRS Publication 970.
The standard deduction is a deduction that is taken out of your taxable income automatically, even if you don't itemize. Before deciding whether or not to take the standard deduction, you should compare how much your standard deduction is to how much you can deduct by itemizing.
- $12,950 for single and married taxpayers filing separately
- Head of household taxpayers pay $19,400.
- $25,900 for married taxpayers filing jointly or qualifying widows or widowers
Preparing and organizing everything for your taxes may appear to be a daunting task, but many people make the same common mistakes. Remember to include all sources of income, look for and include all possible deductions, and understand the difference between a deduction and a credit.
- Not listing all sources of income
- Not taking into account all possible deductions
- Contributions to retirement accounts are not being used to increase tax-deductible contributions.
Start by gathering all of the necessary paperwork, such as Form 1098 for mortgage interest rate deductions if you are filing taxes with multiple deductions. Keep detailed records for any other deductions based on expenses or contributions. If you itemize your deductions, keep track of any qualified medical expenses, charitable contributions, or other itemized deductions. If you plan to take the standard deduction, keeping records isn't as important.
Preparing for tax season in 2023 may be the last thing on your mind right now. Believe us when we say that preparing your taxes is an ongoing process that spans the entire calendar year. Keep track of these tax breaks and use the money you save to help your loved ones. Talk things over with your tax advisor to come up with a strategy that will benefit you the most!
Being audited is comparable to being struck by lightning. You don't want to practice pole vaulting in a thunderstorm just because it's unlikely. Making sure your books are accurate and your taxes are filed on time is one of the best ways to keep your head down during tax season. Check out Vincere's take on tax season!
This post is just for informational purposes and is not meant to be legal, business, or tax advice. Regarding the matters discussed in this post, each individual should consult his or her own attorney, business advisor, or tax advisor. Vincere accepts no responsibility for actions taken in reliance on the information contained in this document.
For business tax planning articles, our tax resources provides valuable insights into how you can reduce your tax liability now, and in the future.
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