In a tight economy, many people forego a vacation. However, working hard all year without the prospect of taking a vacation can be quite depressing. There is one possible solution to this problem, and it isn’t taking a “staycation” at home. You can find the extra money for a trip by saving more on your taxes. One more thought, when you are a small business owner and you are traveling on business, most of the time you can write off the expenses on your end of the year taxes. Most business people request a tax extension so that they can get all of their write offs in line. Simply use the tips below.
1. Use Above the Line Deductions
Above the line deductions are deductions a person can take on his or her income tax form whether or not that person used the standard deductions. One example of such a deduction is a deduction for contributions that a person made to a 401(k) or IRA pension plan. Usually, such contributions are tax deductible up to an annual limit.
Contributions to an account for health savings is another above the line deduction that many people can take. Deductions for student loans are another option that can be used as long as the student’s adjusted gross income is lower than $70,000 and he or she is not filing separately from a spouse.
2. Use Deductions for the Interest on Your Mortgage
Another significant deduction many people can take but do not is a deduction for paying interest on a mortgage. This includes a mortgage taken out to purchase a home, build a home, or even repair a home. If the mortgage was issued after 1987, a person is allowed to deduct interest for the first half a million dollars of the deductible. If a person is married, however, that person can deduct interest on the first million dollars. If the mortgage was taken out before 1987, there is actually no cap.
3. Use Deductions for Healthcare Expenses
Another option that many people forget to use is taking a deduction for healthcare costs. With how much certain people pay for healthcare, these savings can be extremely significant. With the current tax code, a person is actually allowed to make a deduction for any medical expenses that exceeded 7.5 percent of that person’s adjusted gross income.
These expenses, however, do not only have to be for expensive surgeries or medications. They can also be for treatment and preventive care. The deductions can also be for the insurance premiums a person paid that year.
4. Use Deductions for Charitable Donations
The deductions a persona can take for charitable donations made over the course of the year is also something that many people ignore when filing their income taxes. However, millionaires and billionaires are not the only ones that can benefit from these kinds of deductions. Middle income taxpayers can benefit from them too.
If you gave cash, that gift can be deducted by up to half of a person’s adjusted gross income. If the donation was physical property, it can be deducted by up to 30 percent. A deduction for capital gains can also be made for up to 20 percent. Donations that were made for over $250 should be accompanied by a receipt to prove their validity to the IRS.
Another great thing about deductions made for charitable donations is that they can be carried over from year to year for five years. If a person exhausts their deductions for donations on this year’s income tax form, that person still has the chance to use them to save money next year. Extensions for businesses because you may be necessary, since things can get very busy.
If you have discovered that you have forgotten to take any of these deductions, make sure to take them the next time you file your taxes. You will find that you have money left over to spend on a vacation. If the savings are significant enough, you may even be able to pay for two or three trips a year.
