Do you voluntarily send more tax dollars to Uncle Sam? Most people would answer with a resounding “NO!” but guess what—if you aren’t using personal deductions properly, that’s just what you’re doing. Giving your money away.
The team at Broussard Poché, LLP wants to arm you with knowledge. Personal deductions are one way you can save money come tax time, let’s talk about what you need to know.
Deductions will help you pay less taxes
It’s a fact: deductions will lower your taxable income. In practice, you subtract certain deductions from your total income, this gives you your adjusted gross income (AGI). After determining your AGI, you then subtract other deductions to arrive at your taxable income.
The Two Types of Personal Deductions
- The Standard Deduction is a deduction determined by the IRS every year for every taxpayer. The amount of the deduction is dependent on your filing status.
- Itemized Deductions are various items that you’ve paid throughout the year that the IRS lets you take advantage of on your tax return.
To figure out which deduction is right for you, we suggest that you add up the items you would use for the itemized deduction list then compare it to the standard deduction. The one that saves you the most money is the one you should choose.
Here are a few personal deductions to be aware of:
- Health Insurance and out of pocket medicine expenses
- Charitable Gifts
- Mortgage Interest
- Property Taxes
- Unreimbursed Employee Expenses
- Casualty Losses
These are just a few there are many more that could apply to your situation. If you go the itemized deduction route, you’ll want to consider hiring a tax professional to help. The more items you have to deduct, the more complicated the calculations can become. Instead of accidentally leaving money on the table, contact your financial expert.