Are we out of the inflation hole yet? (A curious mind wants to know…)
Well, according to the Fed, they’re waiting a little bit longer to confirm that. The good news for now is no new interest rate hikes and maybe even some cuts down the road.
That spells good things for the country’s wallet, and yours too.
And continuing in that theme, I want to expound on some other ways you can help your wallet on your tax return.
Speaking of…
Time to get that 1040 (and any other tax form you need to fill out) filed. There’s about a month before the deadline is on us. And… if you want some bonafide tax expert help from a reliable Chattanooga professional you can trust, get on my calendar.
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Before our appointment, let me give you an idea of the kind of savings I’m looking out for when I prepare your filing…
5 Income Tax Deductions Chattanooga Taxpayers Overlook
“An investment in knowledge pays the best interest.” – Benjamin Franklin
This is the time of year you’re scrambling to get taxes filed (unless you took my advice and did them last month). And when you’re scrambling, it means you have potential for missing things.
But I want to make sure you don’t miss some of the top ways you can reduce what you owe the IRS.
While you may not be able to claim everything in this list, it’s worth taking a look to see if you’ve missed any of these and figuring out which ones you do qualify for.
Income Tax Deduction #1: Medical and dental expenses
Despite the reality that 90% of Americans have some form of health insurance, paying medical costs can still be a hurdle for most. On average, about 8.6% of adults have to pay off medical debt every year.
If you fall in that category, you may be able to deduct out-of-pocket medical expenses. The criteria here is that the medical cost you’re paying must surpass 7.5% of your adjusted gross income (AGI). Medical costs can include everything from doctor’s visits and prescriptions to necessary medical equipment, mileage for care, and even some medically necessary home renovations. Though keep in mind that a lot of “general health” expenses don’t count. (No, you can’t count your diet plan purchases here.)
For a more detailed list you can check the IRS’s detailed list via Publication 502 (and we’re here to help you verify what applies and what doesn’t).
Income tax deduction #2: SALT (State And Local Tax) deductions
This is one that can easily get overlooked but can be really beneficial if you itemize your deductions. The SALT deduction allows you to deduct certain taxes paid to your state and/or local government.
The SALT deduction offers some relief by allowing you to deduct a combined total of up to 10K (the TCJA cap) for the following:
– State and local property taxes
– State and local income taxes OR sales taxes (you can’t claim both)
Income tax deduction #3: Interest payments
No one likes paying interest, but it’s just a part of taking out loans. The good news is, the IRS does offer some valuable deductions for interest paid, depending on the type of loan or situation.
– Deduct interest paid on a mortgage used to buy, build, or improve your primary or secondary home.
Note: Specific limits apply based on when your mortgage was taken out.
– If you’re repaying student loans, you could deduct up to 2.5K of interest paid on qualified loans.
Note: Income limits do apply here: 75K or less for single filers and 155K or less for joint filers.
– Deduct interest on loans used to purchase taxable investments (e.g., margin interest).
Note: You are limited to the amount of your net investment income – you can’t deduct more than you earn from investments.
Income tax deduction #4: Charitable contributions
You can deduct cash donations, out-of-pocket expenses incurred while volunteering, and the fair market value of donated goods to qualifying charities.
Note: Taking advantage of the charitable deduction only makes sense if your total itemized deductions exceed the standard deduction for your filing status.
Here’s why… Many taxpayers find the standard deduction provides a larger tax benefit than itemizing, even with charitable giving.
Example: If you’re single and gave 3K to charity, itemizing wouldn’t help because the single filer standard deduction in 2023 of 13.85K is already higher than your charitable deduction.
Income tax deduction #5: Home-related tax breaks
These include claiming your home office, home improvements of the energy efficiency variety, and home mortgage interest.
If you’re self-employed or meet certain requirements as a traditional employee, you may be able to deduct expenses for a dedicated workspace in your home — as long as it’s used regularly and exclusively for business purposes.
Upgrades like installing solar panels, replacing exterior doors, and adding new insulation can also garner tax benefits (the full list of what qualifies).
You may be able to deduct home mortgage interest for the first 750K of indebtedness.
Understanding income tax deductions can feel like a lot, but their potential to lower your tax liability makes the effort worthwhile. If the complexities become overwhelming, consulting a reliable Hamilton County tax professional, like me, would be a wise investment.
Let me know if there are any other deductions you’d like explored in more detail!
Helping you claim every deduction you can,
John and Wanda King
