IRS Approved Deductions
No one likes paying taxes, but the IRS does make things a bit easier by providing approved deductions that taxpayers can use to lower their tax bills. Take advantage of these deductions, lower your tax burden substantially and keep more money in your pocket.
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Mortgage Interest
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If you have a mortgage on your home, deduct the amount of money you pay in interest. You must itemize your deductions to claim your mortgage interest, so it is a good idea to run the numbers and determine if the total of your itemized deductions is higher than the standard deduction the IRS provides to all taxpayers.
Health Savings Accounts
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If you have a health care plan classified as a high-deductible health plan, or HDHP, open a health savings account and take a deduction for the amount you put in. The health savings account helps pay for expenses not covered by your regular health plan. A high-deductible plan can save you money on premiums, and combining that plan with a health savings account is one way to make the plan more affordable. Since the money invested in the health savings account is not subject to tax, individuals can enjoy a tax deduction for the amount they put into the plan, up to the limit imposed by the IRS.
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Retirement Plans
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If you contribute to a traditional IRA account, deduct that amount when you complete your tax return. In addition to the deduction for an IRA, the IRS also allows you to lower your taxes by contributing to a 401k plan. The money you contribute to the 401k plan comes out pre-tax, which effectively lowers your taxable income and your tax liability.
State and Local Taxes
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Itemize your deductions and claim a deduction for the state and local taxes you pay, including the property taxes paid on your residence. For that reason, keep all of your tax receipts from state and local taxing authorities. Have the records handy when you do your taxes and make it easier to compute how much you paid and figure your deduction.
Charitable Donations
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Donations to charity are deductible for tax purposes. Deduct the amount of cash you gave to your favorite charity as well as the value of any goods you donated. Get a receipt from the charity to back up the value you claim. The IRS may question large non-monetary donations, and you will need the documentation to back up the value you listed on your return.
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References
- Photo Credit A young woman holding a pen, doing her taxes image by Christopher Meder from Fotolia.com
