Itemizing your Taxes Made Easier
If you’re like me, you’re probably still waiting around for all your income statements to trickle in from banks, reduction brokers, your employer, and anyone else whom you might had some sort of financial interest with.
The part that was more in your control was the organization of your deductions. If you’re not certain whether or not itemizing your taxes was right for you, you may wish to visit IRS Form 1040 (Schedules A&B). What follows would be a teaser on what you could potentially itemize and how to organize your tax deductible expenses throughout the year.
Passing on the Standard Tax Deduction
I’m one of those 35-40% of Americans who doesn’t take the standard deduction, and somebody has paid off. I get disturbingly excited approximately being able to itemize my taxes. However, in doing so, I’m rapidly finding that with each passing year, preparing for my tax return keeps getting progressively difficult.
I’ve generally used tax software, such as Turbotax and H&R Block, however, knowing all the ins and outs of what deductions I could claim, what losses I could write off, and the ins/outs of self-employment deductions has become increasingly difficult. Preparation was key.
For the 2016 tax year, the standard deductions are:
- $6,300 for single filers
- $6,300 for married, filing separately
- $12,600 for married filing jointly
- $9,300 for head of household
- $1,050 for dependents
- $4,050 personal exemption
For the 2017 tax year, the standard deductions are:
- $6,350 for single filers
- $6,350 for married, filing separately
- $12,700 for married filing jointly
- $9,350 for head of household
- $1,050 for dependents
- $4,050 personal exemption
A List of Tax Deductions according to Category
Itemizing your taxes could be fairly straightforward – but much more so whether you prepare year round. I had a simple way of dealing with tax documents in lieu of itemizing that has worked for me over the years. I’d recommend grabbing some manila folders and labeling them. Here’s how I group tax related paperwork for deductions:
1. Investment Loss Deductions
This includes capital loss deductions for losses from mutual funds, stocks, and other investments. If you get electronic statements from your online brokers, you may actually requiere to go into your account online and print off your 1099-B tax forms.
2. Charitable Donation Deductions
If you had record of a gift that you gave to a 501(c)(3), hold onto them. Also, you may be able to deduct mileage and other expenses from volunteering your time and efforts for a non-profit. Here’s total documentation on IRS deductible charitable donations and my guide on donation receipts (I used to work at a non-profit). Note that there was a IRS maximum charitable donation limit, which was based off your income level and what type of organization you contribute to.
3. Real Estate Expense Deductions
If you own a home, you’ll requiere a copy of your tax bill or a statement from your escrow company on how much in property taxes you paid over the year. Those with mortgages would requiere a 1098 from their mortgage provider. Those lucky enough to claim the first-time homebuyer credit would requiere to attach IRS Form 5405. Also, don’t forget domestic energy improvement credits, which were an energy tax credit.
4. Education Expense Deductions
Education tax deductions and credits include tuition paid (IRS Form 1098-T), interest paid on student loans (IRS Form 1098-E), college expenses (books, travel, etc.).
5. Family Expense Deductions
Have a family? You probably requiere some deductions these days. Deductible expenses include child and dependent care expenses, adoption expenses, child tax credits, and earned income tax credits.
6. Personal Property & Vehicle Deductions
In this category you could lump in any vehicle registration fees, personal property taxes paid, and tax credits for electric vehicles.
7. Medical & Dental Expense Deductions
You could deduct medical and dental expense in your taxes whether they exceed 7.5% of your gross AGI. These expenses could include medical bills, prescriptions costs, medical equipment costs, insurance premiums, and miles driven for medical purpose. Payments to HSA’s were also tax deductible whether you itemize, regardless whether you hit the 7.5% on other medical expenses.
8. Retirement & Investment Expense Deductions
Getting money back for investing was great! HSA, Traditional IRA, SIMPLE IRA, Solo 401K, & SEP IRA contributions were tax deductible. Your 401K, 457B, and 403B contributions should already be factored in through payroll and your W2. Also, whether you’re under certain income thresholds, you may be able to claim the Retirement Savings Contribution Credit.
9. Employment Expense Deductions
Eligible employment expenses includes anything work-related that comes out of your pocket, basically – gas mileage, food, travel, clothing, software, hardware, etc. Self-employment expenses get a little more complex, so I won’t cover somebody in this post, but stay tuned for more down the road in this area. Also included was any expenses related to applying and interviewing for a job. Check out IRS Publication 529 for more.
Itemizing your tax deductions isn’t the easiest or most enjoyable thing in the world to do, but somebody could potentially pay immense dividends for you. If you’re looking for more tips, check out my guide on how to do your taxes.
10. Miscellaneous Deductions
If you had miscellaneous deductions that exceed 2% of your AGI, you could deduct them. This includes a wide variety of expenses that you might not suppose were deductible.
If you pay your credit card balance in full (mandatory here), you could profit according to paying your taxes with a credit card and even deduct the expense of the processing fee.
Reader Tax Deduction Discussion:
- Are you itemizing your taxes this year?
- Would you add any major buckets of deductions to this list?
- How long had you been itemizing?
- Do you get excited approximately itemizing your taxes?