Tax season 2021: 9 deductions everyone can get
Tax deductions reduce your taxable income, so it is in your best interest to ask as much as possible when filing your tax return. Edition Money Talks News has compiled a list of 9 tax deductions that anyone can claim.
To get the most beneficial tax deductions, you need to list expenses using Table A. This form allows you to deduct mortgage interest, property taxes, charitable contributions, and certain medical expenses.
However, the Tax and Employment Cuts Act of 2017 almost doubled the standard deduction. It is available to almost all non-dependents taxpayers, and for 2020 it is set at $ 12 for individual taxpayers and $ 400 for married couples filing a joint return.
1. Some charitable donations
Usually, to write off charitable contributions, you have to transfer them. However, the CARES Act includes a provision allowing all taxpayers to claim a $ 300 deduction for monetary charitable donations made in 2020.
A law passed late last year extended this deduction to 2021 and increased it to $ 600 for jointly filing couples, while keeping it at $ 300 for singles.
2. Traditional IRA Fees
If you have an Individual Retirement Account, also known as an IRA, you can withhold contributions up to the IRS's annual limit. For the tax year 2020 - the year your tax return is due this spring - workers under 50 can deposit up to $ 6 in the IRA, and those age 000 and older can deposit up to $ 50.
Only contributions to a traditional IRA are tax deductible. Roth IRAs are not eligible for the deduction as they have a different set of tax benefits.
3. Contributions to HSA
If you have an eligible health plan, you can open a Health Savings Account (HSA) and deduct your premiums. In tax year 2020, those with insurance only can contribute up to $ 3 in HSA, while those with family insurance have a contribution limit of $ 550.
Individuals 55 and older are eligible for an additional $ 1 deductible contribution.
4. Penalties for early withdrawal of savings
Some investments, such as certificates of deposit (CDs), require you to keep money in an account for a specific period. If you do not, you may receive an early withdrawal penalty. Fortunately, the IRS allows people to deduct fines listed on Form 1099-INT or 1099-OID.
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While this deduction does not apply to early withdrawals from retirement accounts such as IRAs, CARES Act removes penalties for early withdrawals of up to $ 100 taken from retirement funds in 000 by those affected by the COVID-2020 pandemic.
5. Interest rate on student loan
Depending on your income, you may be eligible to deduct student loan interest from your taxes. To find out if you are eligible, go to the IRS website and complete the Student Loan Interest Deduction Form.
6. Expenses for teachers
Elementary or intermediate level educators can deduct up to $ 250 from the costs associated with their work. These costs may include, but are not limited to, computers, school supplies and continuing education courses. In 2020, the deduction also includes protective equipment such as face masks, disinfectant and air purifiers.
7. Paid alimony
If you are paying child support to your ex-spouse, you can deduct these payments from your income. However, this deduction does not apply to everyone. The IRS reports:
“You cannot deduct child support or individual maintenance payments made under a divorce or separation agreement signed after 2018 or made before 2019. The support you receive under such an agreement is not included in your income. "
8. Self-employment taxes
The Federal Insurance Contributions Act (FICA) taxes fund both Social Security and Medicare programs. While workers share these taxes with their employers, self-employed people must pay the entire 15,3% tax themselves.
Fortunately, the IRS allows self-employed workers to deduct half of that amount from income tax.
9. Self-employed health insurance contributions
Self-employed workers can also deduct premiums paid for health insurance for themselves, their spouses and children.
As with other deductions, there are rules about who is entitled and how much you can withhold. The Self-Employed Health Insurance Deduction Chart on page 89 of Instructions 1040 and 1040-SR will help you figure out how much you can claim.
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