Common Income Tax Deductions
Over the weekend, I spent a couple hours pulling together tax records and wracking my brain to make sure that I don’t forget anything. Since I’m sure I’m not alone in this, I thought I’d put together a list of common tax deductions that many people qualify for. Keep in mind that this list is just a start, and that you’ll also want to verify that your eligibility before claiming them.
First up, some common federal tax deductions that you can take whether or not you itemize (as Curtis points out, these are technically ‘adjustments‘ as opposed to deductions):
- Retirement contributions (Traditional or SEP-IRA, 401(k), etc.)
- Student loan interest (up to $2,500/year on qualified student loans)
- Capital losses (realized losses can offset unlimited capital gains or $3,000 in income)
- Business expenses (business owners and employees with certain un-reimbursed expenses)
Next, some common deductions that you can take if you itemize:
- Home mortgage deduction (deduct interest paid during the year)
- Home equity loan deduction (deduct interest paid during the year)
- State and local taxes (or sales tax if that works out better for you)
- Charitable contributions (cash and property donated to a qualified organization)
- Medical expenses (deduct those in excess of (7.5% of your AGI)
- Personal casualty and theft losses (deduct your loss minus insurance payments)
Note that some of these deductions are subject to income limitations or other restrictions. For a more complete list of federal income tax deductions and adjustments, as well as details relating to each of those listed above, see IRS Publication 17.
Update: I’ve also put together a list of twelve commonly missed income tax deductions.
Published on January 29th, 2008 - 14 Comments
Filed under: Taxes
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You may not be aware thatif your adjusted gross income for 2007 was less than $54,000, you can use Free File at the IRS website to process and file your federal tax return at no charge.
Comment by Lisa Spinelli — Jan 29th 2008 @ 7:11 amI greatly dislike the income restrictions that are put on these deductions and tax credits. It seems my wife and I edge ourselves out of most of them just for being successful. Why penalize those who do the most for our economy? This is the kind of tax code that brought us the 70’s.
Comment by Saving Freak — Jan 29th 2008 @ 7:31 amFreak,
If you did not pay more taxes then who would?
Someone has to. That is the reason for tax codes, to generate revenue.
saladdin
Comment by saladdin — Jan 29th 2008 @ 7:39 amYour first list are actually not deductions, but adjustments. I posted last week about the three categories of tax write-offs. Adjustments come off from your Gross Income. Deductions from your Adjustested Gross Income if you are above the standard deduction. And Credits come off of the total tax due.
Comment by Curtis — Jan 29th 2008 @ 9:08 amI don’t need deductions, I need CREDITS!
(good luck with that)
Comment by Ron@TheWisdomJournal — Jan 29th 2008 @ 11:39 amI might be able to deduct my sales tax this year ( finally! ). I think I paid enough mortgage interest to itemize deductions. Thanks for the reminder.
Comment by Llama Money — Jan 31st 2008 @ 6:09 pmThis was very helpful to me! I don’t usually itemize my deductions, because I’m young and single with no kids and not a homeowner. Even though I give a decent amount to charity, it never adds up to more than the standard deduction. I used to just use 1040EZ (or telefile before they did away with it).
This year I am in a fellowship instead of a regular job, so I have been paying for my own health insurance and contributing to my retirement out of pocket. I need to use the real 1040 this year!
Thanks for your article! I was able to add to adjustments - the IRA deduction and student loan interest deduction (which I could have been doing for years!). I also checked my medical expenses, but it doesn’t exceed the 7.5%.
Anyway, I am happy because I am able to add some adjustments without the hassle of itemizing, and I still get the standard deduction. Thanks again!
Comment by Gen — Feb 7th 2009 @ 5:58 pmI read in the paper Sunday that if you own your home. therefore, paid property taxes, but cannot itemize, that you can increase your standard deduction. Can you tell me more on this subject?
Comment by TERI CAMPBELL — Feb 16th 2009 @ 11:09 amwith obama giving out free grants, if a person qualifies for one to pay bills, is that amount granted, considered as income on your income taxes for that year?
Comment by Cindy — Feb 25th 2009 @ 10:40 amI heard on TV I think it was on Good Morning America, a lady who gives financial advice. She said if you own your home you would be eligible for $1500 deduction. If you were a first time home buyer you could receive $7000 tax credit which had to be paid back over a period of 15 years at $500. My tax preparer does not know anything about the $1500 deduction allowed for home owners. Where could I find this info.
Comment by Geneal — Mar 13th 2009 @ 1:42 pmDoes everyone realize how many taxes there are on every person throughout their careers? They include sales tax, income tax, state tax, local tax, excise tax, inheiritance tax, capital gains tax, gas tax, and literally dozens more!
Think about it……..100 years ago there were zero, zilch, nada, zippo taxes and everyone got along just fine in life.
Comment by SKS — Mar 14th 2009 @ 12:29 pmSKS - Everyone got along just fine? I’m not sure where you got your information from but I don’t believe things were “just fine”….
Comment by Ryan — Apr 13th 2009 @ 4:42 pmI am ordering a headstone for my wife and me. Is the total cost deductible ? Is there any tax break, the stones are very expesive ie. small marble is going to cost 5,300.00.
Comment by Lynn Dufort — Apr 19th 2009 @ 11:19 amL Dufort
I am paying to have my home hooked up to the city sewage. Is this tax deductible?
Comment by Erica — Apr 24th 2009 @ 6:47 pm