Income tax time can be a dreadful season if you are not aware of all of the income tax breaks you can get through income tax deductions.  It is important to understand what is tax-deductible so that you can get as large of a tax refund as possible.

Probably the most well-known income tax deduction is the Earned Income Credit.  The earned income tax credit is available to those who make a minimum amount of money and can file tax as single, married, or head of household.  The more money you made, the more your earned income tax credit is until you hit the peak, which is around $30,000. Once you hit that peak, the earned income tax credit goes down until you reach the maximum income allowed to receive the earned income tax credit.

The second well-known income tax deduction is the Child Tax Credit.  The child tax credit is available to you if you have two or more children in the home for more than six months out of the year for which you are filing tax, and if you have a tax liability.  Through the child tax credit, you receive around $1000 per child. This total amount is then applied to your tax liability, and any amount of child tax credit left over is made a part of your income tax refund.

Another income tax deduction is for child daycare when the child daycare is needed in order for one or both parents to work outside the home.  This daycare income tax credit is equal to a percentage, up to a maximum amount, of the actual daycare expenses paid for that tax year.  

Other expenses can also be tax-deductible.  Interest paid on a mortgage for the primary residence can be claimed as an income tax deduction.  Medical expenses can also be claimed as an income tax deduction, although this is not very helpful unless you have an excessive amount of medical expenses to deduct on your income tax return.  Tax paid to another state can be used as an income tax deduction in the state that you live in. Donations and contributions to charities, fundraisers, churches, etc. can also be tax-deductible.  

If you are self-employed, you can also claim business expenses as income tax deductions.  This includes any expenses directly related to running your business. You can take a mileage income tax deduction for any miles you put on your vehicle for business purposes.  You can also take an income tax deduction for your office space in your home if it is used only for business purposes in the form of a portion of your rent, utilities, and phone bills.  You can also take an income tax deduction for your personal computer, printer supplies, and other office supplies as long as you have the receipts for the tax-deductible expenses, and usage logs for the personal computer and other equipment to show that it is used primarily for business.

As you can see, there are many income tax deductions available to you.  If you have any questions about what is tax-deductible, you should contact a qualified, certified, licensed tax accountant today.

Many people donate to charities in order to take advantage of income tax deductions at the end of the year.  However, it is important to understand what charities are eligible for these income tax deductions so that you do not miss out on any income tax deductions that you can take.  It is also important to have a knowledge of what documentation you need to have in order to take the income tax deductions from your donations to charitites.

Charities can include things such as school fundraisers, church fundraisers, thrift store donations, donations to homeless shelters, donations to food assistance programs such as Harvesters, and donations to other charities such as hospital programs and women’s shelters all qualify as charities for the purpose of income tax deductions.  However, there is the documentation you need in order to legally claim donations to these charities as income tax deductions.

Purchases from school fundraisers are usually accompanied by some type of receipt or packing slip.  Use this documentation to claim your income tax deduction for these charities. Purchases and contributions to church fundraisers do not typically come with any form of receipt, even though that receipt is necessary in order to claim the donation to the charities as a legal income tax deduction.  Your best bet is to ask the church charities to provide you with some type of written record, even on a piece of regular notebook paper, indicated the amount of the donation. If your donation to these charities is in the form of property or items rather than money, you can estimate the reasonable value of the item and include that on the receipts from the charities.  This ensures that you have a reasonable and provable amount to deduct from the donations to the charities for your income tax return.

Other types of charities typically provide receipts for donations to charities.  If you donate items or property such as clothing, furniture, vehicles, toys, or food you can estimate the value of the donation and receive a receipt from the charities based on that amount that also lists what items were donated, then use that receipt for your income tax deduction.  If you purchase something new to donate, you can keep your purchase receipt signed by someone from the charities, and use that as a record of your contribution for your income tax deduction.

Charities can always use your help.  Deductions from charities do not get you any extra money on your income tax return above and beyond what you spend.  However, these charities can use your valuable help, and with income tax deductions for contributions to charities, you get everything you pay or give to the charities back on your income tax return.  So in short, you can give your help to the different charities without it costing you a dime! No risk, you help others, and you aren’t out any money. It’s a win-win situation for you and for the charities!  

Donate to your favorite charity today!

At Peavy and Associates PC our mission to assist you with all your tax preparations, payroll and accounting needs.  We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!

 

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