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- Student Loan Interest Deduction
If you’re paying off student loans, you might be eligible for a deduction on the interest paid. Even if you don’t itemize your deductions, you can still claim up to $2,500 in student loan interest. This deduction is available to taxpayers with modified adjusted gross incomes below $85,000 (or $170,000 if filing jointly).
Key Points:
- Maximum deduction: $2,500
- Available even without itemizing
- Income limits apply
- Health Savings Account (HSA) Contributions
Contributions to a Health Savings Account (HSA) can be deducted from your taxable income, reducing your overall tax bill. HSAs are available to individuals with high-deductible health plans, and the contributions grow tax-free and can be used for qualified medical expenses.
Key Points:
- Tax-deductible contributions
- Funds grow tax-free
- Use for qualified medical expenses
- Self-Employment Expenses
For freelancers and small business owners, various expenses related to running your business can be deducted. This includes costs for home office setup, internet, phone, supplies, and even a portion of your utilities. Keeping detailed records of these expenses is crucial for maximizing your deductions.
Key Points:
- Deduct home office and business-related expenses
- Includes internet, phone, and supplies
- Detailed record-keeping is essential
- Medical and Dental Expenses
If your medical and dental expenses exceed 7.5% of your adjusted gross income, you can deduct the amount that exceeds this threshold. This includes payments for doctor visits, prescriptions, medical equipment, and even certain home improvements made for medical reasons.
Key Points:
- Deduct expenses exceeding 7.5% of AGI
- Includes doctor visits, prescriptions, and medical equipment
- Some home improvements may qualify
- State and Local Taxes
You can deduct state and local taxes paid during the year, including property taxes, income taxes, and sales taxes. This deduction is particularly beneficial if you live in a state with high income or property taxes. Note that the total deduction is capped at $10,000.
Key Points:
- Deduct state and local taxes, including property and sales taxes
- Beneficial for residents of high-tax states
- Deduction cap: $10,000
Final Thoughts
Maximizing your tax deductions requires staying informed about all the options available to you. By taking advantage of these lesser-known deductions, you can potentially save a significant amount on your taxes. Always consult with a tax professional to ensure you’re making the most of your eligible deductions and complying with IRS regulations.