5 Common Tax Deductions: What You Need to Know
When it comes to filing your taxes, claiming deductions can help reduce your taxable income and lower your tax bill. Here are five common tax deductions you should be aware of.
1. Standard Deduction
The standard deduction is a deduction that reduces your taxable income. It is a set amount that varies depending on your filing status, age, and whether you are blind. For tax year 2021, the standard deduction is $12,550 for individuals and $25,100 for married couples filing jointly.
2. State and Local Taxes
You can deduct state and local income, sales, and property taxes up to a maximum of $10,000 ($5,000 for married filing separately) for tax years 2018 through 2025. This deduction can be particularly useful for residents of states with high income or property taxes.
3. Mortgage Interest
If you own a home and have a mortgage, you can deduct the interest you pay on the mortgage. This deduction is available for mortgages up to $750,000 for tax years 2018 through 2025. If you paid points to get a better interest rate on your mortgage, you may also be able to deduct those points.
4. Charitable Contributions
If you make charitable contributions to a qualified organization, you may be able to deduct the value of your contributions on your tax return. There are some limits to the amount you can deduct, depending on the type of contribution and the organization you donate to.
5. Medical Expenses
If you have significant medical expenses, you may be able to deduct them on your tax return. However, you can only deduct medical expenses that exceed 7.5% of your adjusted gross income for tax year 2021.
Claiming tax deductions can help reduce your taxable income and lower your tax bill. Be sure to take advantage of any deductions you are eligible for when filing your taxes.