Before the Tax Cuts and Jobs Act of 2017, people could reduce their tax bill by claiming various tax deductions. When the act passed, the standard deduction was raised much higher, making it harder to claim itemized deductions.
The good news is that there are still many deductions you can claim without itemizing. Anyone can claim them, which allows you to reduce your taxes even if you do not itemize.
Here are some of the tax deductions anyone can use.
Contributing to a Retirement Account
Many retirement accounts allow you to deduct your contributions up to the limits of that type of account. Although you deduct the amount in the year of your contribution, some accounts allow you to deduct them until April 15 of the following year. Taxes will have to be paid on the withdrawals when you retire. Your tax rate will likely be lower then, allowing you to save money.Accounts such as a traditional IRA or 401(k) allow tax deductions. If you go for a Roth IRA or a Roth 401(k), contributions are made after tax, which will not give you a deduction. Roth accounts have the advantage of growing tax-free and not having any required minimum distributions (RMDs) after you turn 73.
Put Money Into a Health Savings Account
A health savings account (HSA) is a tax-advantaged savings account. Before opening one, you must have a high-deductible health plan (HDHP). The contribution limits for 2024 are $4,150 for singles and $8,300 for families.Money put into the account gives you an above-the-line tax deduction. The account earns interest and enables you to invest in mutual funds and other investments.
Any money used for medical expenses is tax-free. This feature enables you to save money on medical costs. Policy owners often use a debit card to pay for their health needs. Forbes says that although withdrawals for other purposes are allowed, they will come with a 20 percent penalty—until you reach 65—when you can use the money for anything.
Retirement Accounts for the Self-Employed
Many people work for themselves today. Along with other self-employment tax deductions, they can also enjoy a tax deduction on their retirement account contributions.
If you have a Solo 401(k), Solo401k says you can deduct contributions up to $69,000. People over 50 can deduct up to $76,500.
Simplified Employee Pension (SEP) IRA owners can also contribute these same amounts and deduct them up to the limit. Bankrate says these accounts are also now available as Roth SEP IRAs, but contributions to Roth accounts use after-tax money.
Small Business Tax Deductions
People who own a small business can claim many different tax deductions for their business—and they do not require itemizing. You will need to fill out a Schedule C, though, and you should have receipts for all of them.Almost any business expense is deductible if not extravagant and directly related to your business. NerdWallet says that some of those deductions include:
- startup costs
- utilities
- insurance—business continuation insurance, liability coverage, worker’s compensation insurance, property insurance, etc.
- office supplies
- office furniture—desks, filing cabinets, chairs, etc.
- office equipment—computers, software, printers, etc.
- advertising
- vehicle mileage and maintenance
- travel expenses
- salaries of employees
- legal fees
- and more.
Self-Employed Health Insurance Premiums
Among other small-business tax deductions, if you are self-employed, you can also deduct the cost of your healthcare premiums. Payments to Medicare are also deductible.Medicare costs for Part B, Part D, and other supplement plans are deductible, says MedicareSupplement, and so are your coinsurance, copayments, and deductibles, as long as they are more than 10 percent of your adjusted gross income (AGI). Other medical services not covered by Medicare are also deductible, including hearing, vision, and dental costs. The cost of nursing home care can also be deducted, as well as any transportation costs to receive medical care.
Student Loan Interest
When a student loan has not been forgiven or dismissed, you may be able to deduct your child’s (or your own) student costs. SmartAsset says you can claim a tax break up to $2,500 in interest.Your income may affect how much you can deduct. For single filers, the deduction completely fades out at a modified adjusted gross income of $85,000, and married couples filing jointly cannot claim it if they earn more than $175,000.
Tuition and Fees
Paying for education can be expensive and being able to deduct some of it on your taxes will help reduce the cost. Nolo says you can deduct as much as $4,000 if you pay for tuition and fees for a dependent, for yourself, or a spouse. You cannot deduct it if you claim a tax credit from American Opportunity or a Lifetime Learning Credit.Alimony Payments
Payments to your ex-spouse could be deductible, but the divorce must have been finalized by December 31, 2018. The Internal Revenue Service (IRS) says that if there were any changes to the agreement after that, you cannot claim it as a tax deduction.Some conditions must apply before claiming it as a deduction. Both spouses cannot be part of the same household, the payment cannot be considered child support, they cannot file a joint tax return, and there must be a divorce or separation instrument.
All the above tax deductions are available without having to itemize. Each one you claim reduces the amount of taxes you owe. A tax consultant or financial advisor can help you find even more above-the-line deductions, including charitable donations and a 529 tax deduction.
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