What Can You Deduct From Taxes?
No one enjoys paying taxes, and those taxes can take a big bite out of your wallet. Fortunately, the Internal Revenue Service allows taxpayers to take deductions for a number of common items, including contributions to retirement plans and Health Savings Accounts. Reviewing those potential deductions before you file is one way to lower your taxable income and ultimately your tax liability as well.
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Mortgage Interest
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If you itemize your deductions, you can write off the amount you paid in mortgage interest. Your mortgage holder should send you a statement each year showing how much you paid in interest, and you can use that figure when you prepare your taxes. It is important to run the numbers and compare the total of your itemized deductions to the standard deduction provided by the IRS. If your itemized deductions add up to less than the standard deduction, you are better off not itemizing when you do your taxes.
IRA Contributions
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If you contributed to a traditional IRA account during the year, you can take a tax deduction for that contribution. For 2011 you can contribute up to $5,000 to your IRA, plus an extra $1,000 if you are 50 years of age or older. You have until the tax filing deadline, generally April 15, to make your IRA contribution for the previous year.
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Business Expenses
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If you own your own business, you can take a deduction for expenses directly related to the operation of that business. For instance, if you have a dedicated office in your home, you can take the home office deduction and lower your taxable income. You can also take a deduction for the depreciation of computers, machinery and other equipment used in your business. If you work for someone else, you can deduct the cost of office supplies and equipment you purchased to do your job, as long as those expenses have not already been reimbursed by your employer.
Health Savings Account
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If you choose a high deductible health plan, through your employer or on your own, you can contribute to a Health Savings Account and take a tax deduction. You can then use the money in your Health Savings Account to pay for prescription drugs, eyeglasses, dental care and other legitimate medical expenses. For 2011, you can contribute up to $3,050 to a single HSA or $6,150 to a Health Savings Account that covers your entire family. You can write off those HSA contributions even if you do not itemize your deductions.
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References
- Photo Credit A young woman holding a pen, doing her taxes image by Christopher Meder from Fotolia.com
