Five Tax Deductions You Can Still Claim In 2020

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The 2017 Tax Cuts and Jobs Act eliminated a number of key tax deductions that once helped Americans save thousands.

But thankfully, there are plenty of deductions still in play, and if you’re currently in the process of putting together your 2019 return, here are a few expenses you can still write off.

1. Mortgage Interest

The option to deduct your mortgage interest is still on the table, but the threshold you’ll be subject to will depend on when you signed your home loan. If you signed your mortgage prior to Dec. 15, 2017, you can deduct the interest on a loan of up to $1 million. If you signed after that date, you can deduct interest on a loan of up to $750,000. And remember, it’s the interest on your mortgage you’re writing off, not your mortgage payments themselves.

2. State And Local Taxes

Short for state and local taxes, the SALT deduction was once an extremely lucrative tax break for homeowners with high property taxes and state income taxes. That’s because the SALT deduction used to be unlimited. These days, that’s no longer the case, but it’s still worth a maximum of $10,000. Now that’s not great news if your property taxes alone are double that (which can easily be the case in dozens of East Coast zip codes), but it’s helpful nonetheless.

3. Charitable Contributions

The money you give to charity can serve as a tax deduction, provided it doesn’t exceed 60% of your adjusted gross income (AGI). But it’s not just cash donations you can write off; you can also take a deduction for donated goods. The key there, however, is to deduct the fair market value of the items you give away. In other words, if you donate an older TV that you purchased for $1,000 but is now worth $250, you only get a $250 deduction for it.

4. Medical Expenses

The medical expense deduction is an important tax break for filers who spend a lot of money on healthcare expenses relative to their income. For your 2019 return, you can deduct medical costs that exceed 7.5% of your AGI. This means that if your AGI is $70,000, you’d need more than $5,250 in medical expenses to take this deduction; that first $5,250 is a wash.

5. Your Home Office

If you use your home as your primary place of business, and you have a dedicated space in your home used solely for business purposes, then you’re eligible for a home office deduction on one condition: that you’re self-employed. If you’re a salaried employee who works from home on occasion, or even all the time, that deduction is off the table.

There are two ways to calculate the value of the home office deduction. The first and easiest is to claim $5 per square foot of office space, up to a total of 300 square feet, or $1,500. The second is to total your direct and indirect expenses to come up with your deduction. Direct expenses like office supplies can be deducted in full. Indirect expenses, like heat, electricity, and water, can be deducted proportionately based on how much room your office occupies in your home. If you rack up $10,000 in indirect expenses, and your office takes up 10% of your home, you get to write off $1,000 plus whatever direct expenses you’ve incurred.

Know Your Deductions

Itemizing your deductions is a great way to eke out extra tax savings and shield more of your income from the IRS. There are some deductions you can even take without itemizing on your return, so do some reading to see what tax breaks you’re entitled to this year.

 

Source: The Motley Fool

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