You Might Not Be Aware of These Money-Saving Tax Deductions
Tax deductions – they’re great, aren’t they? You feel like a 1-percenter, avoiding unnecessary taxes and keeping more of what you earn. Except without the giant yacht. But you don’t have to be a billionaire to take advantage of some of these lesser-known tax deductions. Even if you do know about them, you may not know some of the interesting wrinkles attached to them.
Some of these tax deductions are available only if you itemize, while others are for the self-employed. Ask your tax person (ahem) if any of these apply to you.
Tax Deductions for Days!
Charitable Contributions. Normally you need to itemize in order to get a deduction for charitable contributions. But for 2021, single filers can take a straight $300 deduction, while married filers can take $600. Those are monetary donations only. You can receive a deduction if you donate property, too, but only if you itemize. Be sure to keep receipts, especially for cash gifts.
You can also take a 14-cent-a-mile deduction if you drive for charitable work. And one woman was able to deduct the amount she paid to a babysitter so that she could volunteer.
Student Loan Interest. If they’re your student loans, you get to deduct the interest, up to $2,500. But here’s something you may not know. If it’s your parents who are paying them off (as long as they don’t claim you as a dependent), you get to deduct the interest The IRS considers the loan payment a gift to you; then you used that gift to pay on your loan.
Excess Social Security. The government stops collecting Social Security taxes on earnings more than a certain amount ($142,800 a year in 2021). If you have one job that pays you $125,000 and another that pays you $50,000 – well, first off, congratulations! But next, neither employer will know to stop collecting Social Security taxes, because you don’t pass that earnings limit with them. So you can claim the excess as a deduction on your tax return.
Lifetime Learning Credit. If you’re taking courses to improve your job skills, you may get a tax credit. A credit is even better than a deduction, because each dollar of the credit pays your tax bill. The Lifetime Learning Credit is figured using a percentage of your tuition paid. And this credit is good for life, even if you already have a college degree.
Health Insurance Premiums. If you’re self-employed, your health insurance premiums are consider an expense to your business. See our previous blog post here.
Not Tax Deductions, But Still Good
Reinvested Dividends. This one isn’t a deduction as much as it is a tip to save on your taxes in the future. Many mutual funds automatically reinvest the dividends from the stocks in the fund. Without getting into obscure details, that reduces the amount of capital gains tax when you sell. So it’s important to keep track of those reinvested gains.
Winning an Olympic Medal. Not just a one-percenter with two jobs, but an Olympic champion, too? You’re very impressive! You’ll be happy to know you get to exempt your medal earning from your gross income. It makes you tear up when they play the national anthem, doesn’t it?
This article describes some of the more unusual successfully claimed deductions.
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