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If you are able to take advantage of itemizing your deductions, it can make a huge difference on your tax return.
Itemized deductions can be rather confusing at first. Lets make it simple…
Every year you are able to either take the standard deduction or itemize your deductions.
Standard Deduction: The standard deduction is a predetermined amount the IRS releases every year. The standard deduction for Tax Year 2018 is below:
Itemized Deductions: If you add up your deductions below and they exceed the standard deduction then you would itemize and keep track of your receipts/records. Then you would file Schedule A on your 1040 to take advantage of the tax savings.
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Medical & Dental Expenses
You can deduct out of pocket costs that exceed 7.5% of your AGI. So if you made $100,000 then you could deduct medical expenses that exceed $7,500. So if you had medical expenses of $8,500 in 2018 then you could only deduct $1,000.Most people typically do not have enough medical deductions to benefit because of the 7.5% threshold. If your medical expenses are less than 7.5% of your AGI then there is no need to keep your medical records for tax purposes.
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Eligible expenses: medical and dental insurance premiums paid with after-tax dollars and prescription medications. Certain procedures are not considered medical – so you may want to research expenses that are not ordinary.
Bonus tip: Try to bunch medical expenses into one calendar year to make sure you excess the 7.5% threshold.
Taxes You Paid
You can deduct state income taxes, real estate taxes and personal property taxes (normally related to your car) – now limited to $10,000. This is a major change to the 2018 tax law.
Explore new tools and information from TurboTax to better understand how the new laws could affect your 2018 Taxes. Learn more.
Interest You Paid
If you own a home and have a mortgage, you can deduct the interest you pay. Your mortgage company will send you a Form 1098-A, this will include the interest amount you can deduct.
Check out this article -> Are Home Equity Loans Tax-Deductible? by my Friends at Lendedu and learn about the deductibility of Home Equity Loans.
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Gifts to Charity
You can deduct donations made to a 501(c)(3) organization. Unfortunately you cannot deduct, donations to crowd funding pages.
You can also deduct donations other than cash or check. For example, giving clothes to goodwill. If you claim a deduction more than $500, you have to support that deduction with a form 8283. Form 8283 is pretty simple but you have to be able to support your donation. If you are donating items like clothes or household item, use a thrift store value. Meaning the amount you would pay for it at a thrift store.
If these expenses exceed the standard deduction you are able to itemize your deductions on Schedule A. This will reduce your taxable income — saving you taxes!
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