However, most popular tax software programs are sophisticated enough to run the numbers and choose the best option for the average taxpayer. Most likely, the standard deduction will be your best bet. In fact, about 90 percent of taxpayers do. But there are important distinctions between the two as far as of how they can be claimed and how your overall tax bill is affected. The Tax Cuts and Jobs Act , which passed at the close of , involved some of the biggest changes to our tax code in decades.
One of those changes was the phasing out of personal exemptions. This was in addition to the standard deduction. Now, personal exemptions no longer exist. In addition to getting rid of tax exemptions, there were several more major changes to how tax deductions work. For one, the standard deduction was increased significantly, as Janas mentioned above. However, many deductions were reduced or killed off completely. For example, a cap was placed on property taxes.
The same goes for mortgage interest. Other deductions that have been suspended or eliminated include work-related expenses, tax preparation fees and a host of other miscellaneous expenses. Even though there was a major overhaul to tax deductions recently, there are still plenty of ways to reduce your taxable income in addition to those mentioned above.
If you paid sales taxes for big-ticket items, such as an engagement ring, wedding expenses, electronic equipment, furnishings for a new home, etc. In addition to the sales tax amounts provided in the table, taxpayers may add actual sales taxes paid for specific items.
For example, sales taxes paid for motor vehicles can be deducted up to the amount of the state and local sales tax rate, but not higher. Allowable sales tax deductions for motor vehicles and other large purchases include the following:.
Taxes spent on leased vehicles can also be deducted. First, decide whether to take the standard deduction or whether to itemize deductions. Expenses that can be itemized include charitable contributions, personal casualty and theft losses from a federally declared disaster, mortgage interest, and medical and dental expenses that exceed certain thresholds. If itemizing proves to be the better course of action, taxpayers then must choose between taking the state and local income tax deduction or the sales tax deduction.
People typically pay more in state income taxes than state and local sales taxes, but it pays to total both types of expenses and compare them to make sure. Residents in states with no sales tax likely would fare better by taking the income tax deduction.
If you determine that itemizing expenses is your best option, consider taking the state and local tax deduction that offers the bigger tax break. How We Make Money. Barbara Whelehan. Written by. Barbara Whelehan is a contributing writer for Bankrate. Barbara writes about a range of subjects, including homebuying, real estate, retirement, taxes and banking.
Edited By Lance Davis. Edited by. Lance Davis. Lance Davis is the senior editorial director for Bankrate. Lance leads a team responsible for creating educational content that guides people through the pivotal steps in their …. A shoebox full of receipts and hand-written logs may have served you well but modern tools and apps can do the job just as well, if not better. Even better, imagine not having to worry about your business at all but being confident you still have the information you need.
If you're filing a tax return as a sole proprietor, many of your write-offs will be claimed on Schedule C of your Be sure to know the rules about what deductions you're entitled to.
Depending on the size and scale of your business, you may want to hire an accountant. Learn how parking fees may be deductible if you use your car for business. This post also covers some often-overlooked deductions when traveling for work. Driving to a temporary work location? Our tax expert elaborates on how self-employed workers may qualify for a mileage deduction. Business travel expense deductions can lead to significant savings during tax time but be sure you know the IRS requirements.
Reporting business mileage on your tax return can lead to significant tax relief. Learn how to do it, as well as the records the IRS demands you keep. Employee mileage reimbursement law can vary depending on what state you're in. Learn what's required in California and others before it's too late. Your Uber mileage log can lead to major savings at tax time.
Learn how to claim mileage and how to pay your taxes as an Uber driver. Log in. Get started. Marin Perez.
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