4 Expert Tips on How to Navigate Tax Deductions

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Written By Adrian Cruce

 

 

 

 

 

Does tax season give you that familiar queasy feeling? Would you love to know how to reduce your taxes easily and legally?

There may be a number of tax deductions you aren’t aware of that you could take advantage of. The key is to know what you’re getting into before you start your taxes, and to keep good records along the way.

Here are four tips from the experts that can keep more mullah in your bank account.

1. Health Insurance Premiums

Many of us know about family and dependent tax deductions. If you have minor children, or if you own a home, you can claim these as dependants and get a break when tax time comes.

What you may not realize, however, is that your health insurance premiums can also be deducted. If your medical expenses are more than 7.5% of your adjusted gross income, you can claim this as an itemized deduction.

Those who are self-employed are often responsible for finding their own health insurance coverage. If that’s the case, you can deduct 100% of the cost of your health insurance premiums. This isn’t an itemized deduction, but a total amount that gets taken off your adjusted gross income.

2. Childcare

A great babysitter is hard to come by, and they are also a bit pricey! If you’re hiring a sitter to watch you’re kids while you’re at work, going to school, or searching for employment, you may be able to deduct what you spend.

In some states, you may need to report the name and Tax ID number of the person you’re paying. In others, you simply need their phone number. This can lower your tax without requiring you to itemize.

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3. Business Expenses

Small business owners know how much of their own cash they shell out while trying to attract customers and run a professional outfit. Meals with clients, work-related travel and office supplies can all be deducted on your tax returns.

If you use your home for business purposes, you can write off the interest you pay on your mortgage. You can also deduct the interest on any loans you might take out against your equity.

If you hold social events for your employees, you can deduct up to 100% of the cost. And you can deduct up to 50% of the cost of entertaining prospective clients. Of course, you can also write up the cost of any salaries and benefits you pay.

Things like startup expenses, advertising, and charitable contributions can also be written off. For more information, talk to your accountant or learn about Wealthability.

4. Save Up

We all know that it’s smart to save for the future. But did you know that it can also save you money on your taxes?

You can deduct anywhere from 10% to 50% of up to $2,000 that you contribute to your IRA, 401K, or 403B. This number goes up to $4,000 if you’re filing jointly. The exact percentage you can deduct will depend upon your filing status as well as your income.

The Value of Tax Deductions

When you’re using your income in a responsible way, you deserve to get a break on your taxes. Knowing the tax deductions available to you can help you to keep more of what you earn and keep you looking forward to the future.

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