5 Tax Write-Offs You Can Claim To Save Big Bucks This Yearby Lunna Walker Accountant
The Tax Cuts and Jobs Act, introduced by the Trump government, has brought about some sweeping changes in the tax law. Though the new tax code has left a lot of us confused about how the law is going to impact our taxable income, the new tax code has some hidden tax-saving benefits that thousands of Americans are unaware of.
So, here’s a guide of common tax-write offs that filers can claim to save big on taxes in 2019:
The Benefits of Standard Deduction
Among the tax paying population in the U.S., some choose to itemize while others go for the standard deduction. Up until now, on an average, 70% of American taxpayers opt for the standard deduction every year. But with the Tax Cuts and Jobs Act, the number of people itemizing is seeing a falling trend. A major chunk of the American population is opting for the standard deduction instead of itemizing their tax return.
The amount of standard deduction has almost doubled with the Tax Cuts and Jobs Act. The deductions have risen up to $24,000 for married couples, $18,000 for Head of Household, and $12,000 for everyone else. This means a lot of people will benefit from paying the standard deduction instead of itemizing their tax returns.
The Contributions From Your Health Savings Account
There is a dual tax benefit of having a health savings account. Individuals having a health insurance plan with a deductible as high as $1,350 for single and $2,700 for family or more can benefit from the HSA (health savings account). First of all, your contributions to the health savings account are tax deductible and the withdrawals made to pay for the policy are absolutely tax-free. Second of all, the savings in the HSA are like a 401(k), which means you can invest these funds, absolutely guilt-free!
Student Loan Interest (Even When The Parents Are Paying For It)
Students can claim a tax deduction of up to $2,500 per year for their education loan, even when their parents are paying for it. Although the students are responsible for paying the loan themselves if declared ‘not dependent’, IRS will consider that the parents paid the amount first to their children, who then used it to pay for their loan interest. Thus, even if you do not enjoy paying your loan interest, this deduction is definitely going to help you save on taxes.
The Contributions From Your Retirement Savings
If you want to further qualify for a tax break, you may want to consider saving for retirement. Your retirement savings will serve two desirable purposes: one, they will save you from taxes and two, you will have a decent amount of savings by the time you actually retire. An individual having an IRA i.e. an Individual Retirement Account can save tax up to $5,500 that is directly deposited into the retirement savings. There are several other tax breaks of having retirement savings. Opt for a professional tax software solution, such as ProSeries tax software hosting or Lacerte hosting, and consult your tax advisor/accountant to maximize your benefits.
The Big Fours To Itemize
As previously mentioned, the Tax Cuts and Tax Jobs Act has doubled the number of standard deductions, which is why most American taxpayers may prefer to go for the standard deductions. Itemizing will not be as beneficial if you are looking to save on your tax return this year. The TCJA has put new limits on itemized deductions and individual taxpayers must consult their tax professionals to ensure that itemizing is the best choice for them.
However, if an individual still wishes to itemize, the sum of four primary deductions must be greater than the standard deduction. The big fours that qualify to itemize for an individual are medical expenses, mortgage interest, charitable contributions, and state and local taxes.
A Final Word
There is still more to the Tax Cuts and Jobs Act apart from the deductions mentioned above. Not every break has undergone a change and the law does not apply the same to every state. While much of the taxpaying population in the United States is going to benefit from the TCJA, some will still go unaffected.
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Created on Jan 2nd 2019 06:08. Viewed 587 times.