As the end of the year approaches, lets take a look at a few year-end tax moves worth considering. For those of you who aren’t familiar, standard deductions ensure that not all of your income is subject to federal income tax. Basically, they are the reason for your tax refund check every year. For single persons or married persons filing separately, the 2020 standard deduction is $12,400. For married persons filing jointly, the standard deduction is $24,800.
While many people take the standard deduction every year, under certain circumstances, it might be worth looking at itemizing your deductions. If you believe that you can write off more than the standard deduction based on some of the write-off items below, it’s worth running the numbers to see if you should! (Do more research too as this list isn’t all-inclusive). Doing so can get you a bigger tax refund check which is always a nice thing to have. Let’s take a look at a few tax deductions and tax tips that may be applicable to you!
Mortgage interest: You can deduct mortgage payments for the year on your primary and secondary homes. This includes interest on homes up to $1 million if you purchased the home prior to December 15, 2017 or $750,000 if you purchased it after that date. If you purchased a home this year, you can write off points purchased, mortgage origination fees, and property taxes.
Charitable Contributions: Doing some fall cleaning and don’t know what to do with all of that stuff? Give it to charity and keep the receipt! You can donate gifts in kind and cash donations of up to 50% of your adjusted gross income to charity each year — and write it off! Look here for a good explanation of what you can and cannot write off. If you think you’re close to itemizing, charitable donations may end up making the difference!
Child and Dependent Care Credit: This one is especially beneficial to those of you who are dual military or both of you work. You can deduct 20-35% of $3,000 for one dependent or $6,000 for two dependents for relevant child care expenses that enable you both to work. If the individual is a child, they must be under 13. Full details here. You can also claim a tax credit of up to $2,000 per qualifying child depending on the situation. Talk to your tax advisor for specific details.
Student Loan expenses: You can deduct up to $2,500 on qualified student loan interest each year. You can also claim student loan expenses as a deduction to your income in some situations.
Stock Market Losses: While these aren’t part of your itemized deduction, you can deduct $3,000 in stock market losses per year from your income for a given tax year. However, your total stock market wins and losses play a part here. If you are up $3,000 for the year, you will be taxed on the additional income. If you are down $3,000, you can subtract this from your income. If you really want out of that stock that you’re losing in at the moment, the end of the year might be time to sell to reduce your taxable income.
If you are looking to reduct some passive income from rental properties, it might be worth considering fixing some things around your rental property at the end of the year as well to offset gains and lower your taxes from such forms of income.
While this list isn’t meant to be all-inclusive by any means, I hope it helps as the end of the year approaches. Talk to your tax advisor for specific questions. Best of luck out there! $
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Any accounting, business or tax advice contained in this communication is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties.
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