Tax day is right around the corner, and I bet you want to make the most out of eligible tax write-offs (also commonly referred to as deductions). In case you’re confused as to what the heck a tax write-off is to begin with, it’s essentially an expense that you can deduct from your taxable income when you’re filing your tax return. This guide is going to provide you with helpful information on some of the more popular write-offs you can deduct in 2019.
Write-offs are a smart way to save money and maximize your tax return. However, keep in mind that how much you benefit is also dependent on the income bracket you fall into. Corporations, small businesses, individuals, and self-employed businesses are all able to write-off expenses on their income taxes.
Here are a few of the most common tax write-offs that you can deduct from your taxable income in 2019:
If you use your vehicle for business purposes only, you may deduct the expenses incurred to operate the vehicle. However, if you use the car for both personal and business purposes you would only be able to deduct the cost that is associated with the business side. Typically to figure out how much you can deduct from your car expenses you can calculate the standard mileage rate and/or actual expenses. More information can be found here.
Not only can your contributions help make a meaningful difference and leave an impact, you can also write eligible contributions off on your taxes. The IRS states that you may deduct charitable contributions of money or property made to qualified organizations if you itemize your deductions. Generally, you may deduct up to 60 percent (this was bumped up from 50% after new tax laws went into effect) of your adjusted gross income, but 20 percent and 30 percent limitations apply in some cases. Keep in mind that there are perimeters around donating to the non-profit of your choice, full details can be found here.
High medical expenses and emergency situations unfortunately happen quite often. If you’ve incurred higher than usual hospital bills, you may be able to itemize and deduct medical and dental expenses for yourself, your partner, and your dependents if the total expenses you incur exceed 7.5% of your adjusted gross income. Payments made to doctors, chiropractors, dentists, psychiatrists, and surgeons may qualify and medical care expenses that include diagnosis, cure, treatment, prevention of disease all qualify. Medical expenses that cannot be deducted include expenses that have been reimbursed by your employer, voluntary cosmetic procedures, vitamins, and personal health products. There’s a vast list of other potential medical deductions that can be found here.
Chances are you’re already contributing into your Health Savings Account (HSA) but did you know that you can also write it off as a deduction? If you have an HSA through your employer you are able to claim a deduction on the monetary contributions that you have made into the account the previous year. Keep in mind, that you cannot include the contributions your employer makes but only your own. You also cannot claim this deduction if you are covered by other health insurance plans such as a PPO or an HMO. The limit for 2018 is $2,650. You can find more helpful information regarding HSAs here.
If in 2018 you paid for daycare, babysitters, camps, and other forms of child care you may qualify for child care deductions. The Child Tax Credit (CTC) helps parents with dependents under the age of 17 (16 or younger). The credit is $2,000 per qualifying dependent. There have been changes to the Child Tax Credit from a tax plan President Donald Trump signed in late 2017. See more details here.
If you moved for a new job in 2018 brush up on a few important changes made to moving expenses you can deduct in lieu of the tax reform. Starting in the 2019 filing year, the cost of moving boxes, moving vans, movers, and packers can no longer be tax deducted under the new tax reform law that was passed in late 2017. The changes apply to non-military civilians. Active duty military can still deduct qualifying moving expenses as long as they haven’t received reimbursement from the government. Active military can include moving expenses such as travel, temporary lodging, moving home goods, and shipping cars and pets if they are moving due to a change of station or military order.
If you’re one of the millions of Americans paying back your student debt the good news is you’re able to deduct the interest you’ve paid as long as it’s a qualified loan (unfortunately if your uncle loaned you money for school that doesn’t count). Tons of changes were made after the tax reform but thankfully the student loan deduction remained untouched. If you’re paying back your student loans you’re eligible to deduct up to $2,500 of student loan interest for 2018. Before filing your taxes, wait for your lender to send you a 1098-E form that you can report on our tax return. You may also qualify for additional education expenses such as tuition, course materials such as books, supplies, and equipment.
Home office expenses can get a bit tricky so tread carefully. The caveat is that you may only claim these deductions if you use a section of your home exclusively for business purposes. Be it a designated space or room that is purely for business — no exceptions. Dueling it as a guest room or rental space would disqualify you. According to TurboTax, “your home office business deductions are based on the percentage of your home used for the business or a simplified square footage calculation.”
Teachers who purchase school materials out-of-pocket are able to deduct up to $250. If you’re married and your spouse is also an educator, you’re eligible to file up to $500 jointly. Kindergarten through 12th grade instructors, counselors, principals, and aides that work at least 900 hours a school year are able to write off school incurred expenses such as books, supplies, computer equipment, and other supplementary materials.
You can deduct accounting fees that you incurred for your business such as setting up your accounting books, preparing your annual tax return, or accounting counsel you received for your business. Basically, if you sought out the counsel of an accounting professional to help you with your business you most likely qualify for a deduction on your tax return. If you’re curious to know if your cautious record-keeping counts as a deduction you can find more information here.
While you’re not able to deduct Roth IRAs, you may be able to deduct a Traditional IRA. If you and your spouse are covered by a retirement plan at work and your income exceed a designated level then your deduction is limited. However, if you have no retirement plan at work you’re allotted your deduction in full.
The American Tax Credit is a credit of up to $2,500 per qualified student. If the credit brings the amount of tax you owe to zero, you can have possibly have up to $1,000 refunded to you. To qualify you must be pursuing a degree and be enrolled at least half-time for at least one academic period in the tax year, you must not have a felony drug conviction, and must not have claimed the AOTC or the Hope credit for more than four tax years. You can find more information here.
If you’re a homeowner you can also deduct mortgage interest tax on your annual tax return. Starting in 2018, the deduction has been scaled back to interest on debt up to $750,000, instead of $1 million, for buyers who bought homes on or after December 15, 2017. According to the IRS, for homes bought before December 15, 2017 there is no change. However, for homes bought December 15, 2017 and onward, you may deduct the interest you pay on mortgage debt up to $750,000 — or $375,000 if married filing separately.
When you think of dependents I bet you default to thinking only children qualify as dependents for a tax return. However, if your parents are elderly and you have been caring for them you can count them as a dependent . In order to qualify you must have provided more than half of your parent or parents support in the prior tax year. Your parent must also meet the income requirements set by the IRS — which tend to change from time to time. Find more information here.
If you’re iffy or unsure about any tax write-offs you’re wanting to claim this year, do not hesitate to speak to a tax professional or a Certified Public Accountant in order be 100% sure.