Congratulations! You made it through another year. What better way to start 2017 than with 17 great money-saving tax deductions? Use them to save money on your 2016 taxes if applicable, and keep them in mind to save on next year’s taxes as well.
1. Charitable donations: Donations to a qualified charitable organization are deductible (qualified organizations should be able to give you proof of status). Make sure that you can supply all necessary receipts or acknowledgement letters to the IRS. If you receive any goods or services in exchange, subtract the value of the goods and services from the contribution amount.
2. Medical and dental expenses: You can deduct unreimbursed medical and dental expenses that total more than 10 percent of your Adjusted Gross Income (AGI). If you were born before January 2, 1951, you can deduct expenses beyond 7.5 percent of AGI — but the 2016 tax year is the last year for the 7.5 percent exception.
3. Performing artist expenses: Are you the stereotypical starving artist? Certain business expenses of performing artists, as well as reservists and fee-basis government officials, are handled separately from other deductible business expenses. See the instructions for Form 2106, “Employee Business Expenses,” for details.
4. Tax preparation fees: Generally, you can deduct fees that you pay for tax preparation in that year. This means that on your 2016 return, you can deduct the fees incurred in 2016 for preparing your 2015 return.
5. Mortgage interest and points: The mortgage interest that you pay on your home, as well as a portion of the points you paid to reduce your interest rate, may be deductible if you meet the criteria listed in IRS Publication 936, “Home Interest Mortgage Deduction.”
6. Mortgage insurance premiums: Mortgage insurance premiums also qualify under the mortgage interest deduction, but they are subject to phase-out beginning at $100,000 AGI (for married filing jointly status).
7. Gambling losses: Was it a bad year for you at the racetrack but a good year with lottery tickets? Believe it or not, you can deduct gambling losses with sufficient documentation — but only to the extent that you offset other gambling winnings.
8. Real estate and personal property taxes: Generally, taxes that are levied through home ownership, such as personal property and real estate taxes are deductible.
9. State/local taxes: You can deduct your state and local taxes paid in the previous year, or you can deduct the sales taxes that you paid (preferable for states that levy no state income tax). If you choose to deduct sales taxes, consult the 2016 Schedule A instructions to get a baseline value and then add the tax on big-ticket items that were purchased during 2016.
10. Job hunting expenses: If you are looking for a new job within your present occupation and meet other criteria in IRS Publication 529, “Miscellaneous Deductions,” you may deduct certain job-hunting expenses.
NOTE: The following deductions have even greater value, as they are “above the line” deductions. These deductions are subtracted off your AGI directly and are available to you whether or not you itemize.
11. Moving expenses: If you succeeded in the above job hunt and must move because your new job is at least 50 more miles away from your current home, you can deduct some moving expenses. See Publication 521, “Moving Expenses,” for details.
12. Retirement plan contributions: Contributions to tax-deferred retirement accounts may be deductible. Roth IRAs are not since they are funded with post-tax dollars.
13. Alimony: Amounts that you pay to a former spouse, excluding child support payments, may be deductible. See Tax Topic 452 for details.
14. Health savings account deductions: Your 2016 contributions to your Health Savings Account (HSA) are deductible, although employer contributions are not.
15. Self-employment expenses: As a self-employed person, you pay both the employer and employee component of payroll taxes. Fortunately, you get to deduct the 50 percent considered the employer portion. In some cases, you can also deduct retirement fund and health insurance expenses.
16. Educator expenses: Educators can deduct up to $250 in qualified and unreimbursed educational expenses. These can be items used in the classroom or payments for professional development courses taken within your field.
17. Educational deductions: You may be able to claim deductions on tuition, fees, and student loan interest paid — but first see if you qualify for educational tax credits such as the American Opportunity Tax Credit (AOTC). Tax credits subtract directly and fully from your tax bill, compared to deductions that reduce your tax bill proportionally to your tax rate.
Source: THE WEEK