Examples of Tax Deductions
Unfortunately, you can't just deduct whatever you want at any value. All deductions have restrictions. Here are some examples:
Health care expenses: Your out-of-pocket expenses must exceed 7.5 percent of your AGI before you can start writing them off.
You can also write off any preminums you bought through the Health Insurance Marketplace, under certain conditions.
Charity: You can deduct up to 50 percent of your adjusted gross income as charitable donations to public organizations, such as the American Heart Association, and 30 percent of your adjusted gross income as donations to private foundations, such as the Bill & Melinda Gates Foundation. If, however, you make contributions that can show capital gain, such as shares of stock, you are limited to 30 percent for public organizations and 20 percent for private organizations.
Earned Income Credit: This credit is limited by income level, number of dependent children and whether you're filing as a single person or married filing jointly. If you're married, filing jointly and have three or more dependent children, you can claim this credit if your income is $55,952 or less. The maximum credit for tax year 2019 is $6,557 (for married filing jointly with three or more children.)
Some deductions don't require you to itemize them to claim the deduction or credit. These include:
- Moving expenses, if you're moving more than 50 miles to be closer to your job
- Education: In addition to $2,500 of student loan interest, you may be able to claim education credits like the Lifetime Learning or the American Opportunity Credits. You can no longer deduct $4,000 for college tuition and fees.
- Educators' expenses: For example, a teacher who uses her own money to buy construction paper and markers for her classroom can deduct those expenses (maximum of $250 or $500 if both spouses are eligible educators).
- Traditional IRA contributions, to a maximum of $6,000, plus a catch-up contribution of $1,000 if you're over 50.
- Retirement withdrawal penalties: If you withdraw from your IRA account before the age of 59 ½, your withdrawal may be taxed at 10 percent .
- Credits for self-employed workers: You can deduct half of your self-employment tax, health insurance premiums and contributions to some retirement plans, such as Roth IRAs, SIMPLEs or SEPs. Also, you can claim home-office deductions, such as a percentage of rent, electricity and phone service, if these costs are business-related.
- Child tax credit: You may be able to reduce the tax you owe up to $2,000 for each qualifying child under the age of 17.
- Child and dependent care credit: This applies to each child (under age 13) or a spouse or other person living with you that is physically or mentally handicapped that you paid someone to care for so you could work. You can get up to $3,000 of care costs deducted, or $6,000 if you are claiming care for two or more people.
To learn more about tax deductions and related topics, follow the links below.
Last editorial update on Feb 25, 2020 11:51:17 am.
More Great Links
- "7 Requirements for the Child Tax Credit." Intuit Turbo Tax. 2017 (Jan. 23, 2018) https://turbotax.intuit.com/tax-tips/family/7-requirements-for-the-child-tax-credit/L3wpfbpwQ
- "In 2017, Some Tax Benefits Increase Slightly Due to Inflation Adjustments, Others Are Unchanged." IRS. Sept. 30, 2017 (Jan. 25, 2018) https://www.irs.gov/newsroom/in-2017-some-tax-benefits-increase-slightly-due-to-inflation-adjustments-others-are-unchanged
- Bell, Kay. "The IRS has over $1 billion in unclaimed tax refunds. Is any of it yours?" Bankrate. March 8, 2017 (Jan. 23, 2018) https://www.bankrate.com/finance/taxes/irs-1-billion-unclaimed-refunds.aspx
- "Charitable Contribution Deductions." IRS. Aug. 6, 2017 (Jan. 23, 2018) https://www.irs.gov/charities-non-profits/charitable-organizations/charitable-contribution-deductions
- "Deducting Gambling Losses at a Glance." IRS. Sept. 29, 2017 (Jan. 23, 2018) https://www.irs.gov/credits-deductions/individuals/deducting-gambling-losses-at-a-glance
- "Do I Qualify for EITC?" IRS Jan. 16, 2018 (Jan. 23, 2018) https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/do-i-qualify-for-earned-income-tax-credit-eitc
- "Here's what you need to know before withdrawing money from your IRA." USA Today. May 9, 2017 (Jan. 23, 2018) https://www.usatoday.com/story/money/personalfinance/2017/05/09/ira-withdrawls-retirement-planning/101448010/
- "In 2016, Some Tax Benefits Increase Slightly Due to Inflation Adjustments, Others Are Unchanged." IRS. Aug. 6, 2017 (Jan. 23, 2018) https://www.irs.gov/newsroom/in-2016-some-tax-benefits-increase-slightly-due-to-inflation-adjustments-others-are-unchanged
- "Medical and Dental Expenses at a Glance." IRS. Sept. 27, 2017 (Jan. 23, 2018) https://www.irs.gov/credits-deductions/individuals/medical-and-dental-expenses-at-a-glance
- "Retirement Topics - IRA Contribution Limits." IRS. Oct. 20, 2017 (Jan. 23, 2017) https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits
- "Retirement Topics - IRA Contribution Limits." IRS. Oct. 20, 2017 (Jan. 23, 2017) https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits"Tax Benefits for Education: Information Center." IRS. Oct. 18, 2018 (Jan. 23, 2018) https://www.irs.gov/newsroom/tax-benefits-for-education-information-center
- "The 10 Most Overlooked Tax Deductions." Intuit Turbotax. 2017 (Jan. 23, 2018) https://turbotax.intuit.com/tax-tips/fun-facts/the-10-most-overlooked-tax-deductions/L2WjmvZAH
- "The Ins and Outs of the Child and Dependent Care Tax Credit Intuit Turbo Tax. 2017 (Jan. 23, 2018) https://turbotax.intuit.com/tax-tips/family/the-ins-and-outs-of-the-child-and-dependent-care-tax-credit/L2H7rzUWc
- "Top Tax Write-offs for the Self-Employed" Intuit Turbotax. 2017 (Jan. 23, 2018) https://turbotax.intuit.com/tax-tips/self-employment-taxes/top-tax-write-offs-for-the-self-employed/L7xdDG7JL