List Of Tax Deductions 2021: Get The Most Out Of Your Tax Return
Tax season is here, and if you’re like many taxpayers, you’re already looking for ways to maximize your refund. One of the best ways to do this is to take advantage of the various tax deductions available for the 2021 tax year. Tax deductions are expenses that can be written off from your taxable income, reducing the amount of money you owe in taxes. From deductions for business expenses to charitable donations, here’s the list of tax deductions that you should be aware of this year.
Standard Deduction
The standard deduction is the simplest way to reduce your taxable income. Every taxpayer is eligible for the standard deduction, and it is the most common way of reducing taxable income. The standard deduction for the 2021 tax year is $12,550 for single filers and $25,100 for married filers who file jointly. This deduction is taken directly off of your gross income, reducing the amount of money you owe in taxes.
Itemized Deductions
If the total of your itemized deductions exceeds the amount of your standard deduction, then you may be eligible for itemized deductions. Itemized deductions are made up of various expenses that are deductible from your taxable income. These deductions are broken down into categories, such as medical and dental expenses, state and local taxes, charitable donations, and home mortgage interest. To determine whether it’s worth it for you to itemize your deductions, you’ll need to calculate the total amount of your itemized deductions and compare it to your standard deduction.
Charitable Contributions
If you made any donations to a charitable organization in 2021, you may be able to deduct those donations from your taxes. To be eligible for this deduction, the donation must be made to a qualified charitable organization, such as a church or a non-profit organization. You’ll also need to keep records of your donations, such as a receipt or a bank statement, in order to be able to deduct them. The maximum amount that you can deduct for charitable contributions is 50% of your adjusted gross income.
Mortgage Interest
If you’re a homeowner, you may be able to deduct the interest you paid on your mortgage in 2021. The interest must be paid on a loan that was used to purchase, build, or improve your primary home or a second home. You can deduct the interest on up to $750,000 worth of mortgage debt, or $375,000 if you’re married and filing separately. You’ll need to itemize your deductions in order to take advantage of this deduction.
Medical and Dental Expenses
If you paid any medical or dental expenses in 2021, you may be able to deduct those expenses from your taxes. To be eligible for this deduction, the expenses must exceed 10% of your adjusted gross income. This deduction is only available if you itemize your deductions. Common expenses that qualify for this deduction include doctor visits, dental work, and prescription drugs.
State and Local Taxes
If you paid any state or local taxes in 2021, such as income taxes or property taxes, you may be able to deduct those taxes from your federal taxes. The amount of the deduction is limited to $10,000 for the 2021 tax year ($5,000 for married taxpayers filing separately). To take advantage of this deduction, you’ll need to itemize your deductions.
Education Expenses
If you or a dependent paid tuition or other expenses to attend an eligible educational institution, you may be able to deduct those expenses from your taxes. The American Opportunity Tax Credit and the Lifetime Learning Credit are two tax credits that can reduce your taxable income. To qualify for these credits, you must meet certain criteria, such as having a certain level of income and filing a certain type of tax return.
Retirement Plan Contributions
If you made contributions to a retirement plan in 2021, such as a 401(k) or an IRA, you may be able to deduct those contributions from your taxes. The amount of the deduction is limited to $19,500 for the 2021 tax year ($26,000 for those age 50 and over). This deduction is only available if you itemize your deductions.
Business Expenses
If you’re self-employed or own a small business, you may be able to deduct certain business expenses from your taxes. Business expenses that are deductible include business-related travel, meals, entertainment, and supplies. These deductions can help to reduce your taxable income, potentially resulting in a larger refund.
Conclusion
Tax deductions can help to reduce your taxable income, resulting in a larger refund. From the standard deduction to charitable donations, there are a number of deductions available for the 2021 tax year. Be sure to research the deductions that you qualify for and take advantage of them when filing your taxes this year.