Every year when you file your tax return, you have the option to either take the standard deduction or itemize your tax deductions in Round Rock, TX. Your choice will largely depend on how much money you stand to save (or get back) with either option.
The vast majority of people take the standard deduction these days, both because it’s simpler and because ever since tax reforms in late 2017, the standard deduction is twice the value of what it used to be. However, there are still people who can benefit from itemizing, and if you are one of those people it’s important to carefully consider your available options and what will save you money.
Here are some tips to help you get your deductions in order.
Check your qualifications
Consider the various categories of deductions and make sure your expenses qualify. IRS approved categories for deductions include home mortgage points, medical or dental expenses, charitable contributions, interest expenses, casualty and disaster losses and deductible taxes.
Keep in mind that it’s not enough to have expenses in those categories—they must pass a threshold in some cases to qualify for itemization. For example, medical and dental expenses must exceed 7.5 percent of your adjusted gross income for the year.
Spend when you itemize
If you know you’re going to be itemizing for a given year, then it is also sensible for you to spend as much as you can in deductible categories so you can get the maximum effect for your taxes. You shouldn’t spend just to get a deduction, but if you know you’re going to qualify for a deduction and have other needs in that category, you may as well increase the benefits you get from that deduction.
Bunch up your deductions
Bunching your deductions together can help you get the most value possible out of them, particularly when you need to exceed a minimum threshold to qualify. This means bunching up all of your medical expenses for the year. Or, you could push medical expenses from one year into the following year so that you can qualify for that deduction. So, if you can delay a medical treatment (or payment for that medical treatment), this can help you on your taxes.
Of course, your first priority should always be your health, and there are certain kinds of treatments you will not want to delay.
Track your deductions
Keep a checklist of all the deductions you normally take in a given year so you can follow them throughout the year and make sure you’re setting yourself up well for your tax bill. In addition, keeping a checklist of all of the available deductions can help you find other types of deductions you might typically bypass or forget about, including one-time and even certain everyday expenses.
For more information about how you can itemize and make the most out of your tax deductions in a given year, we encourage you to contact Perrin Anderson Rastogi Tax Services LLC to speak with an experienced CPA in Round Rock, TX.