For first-time taxpayers, the actual act of filling out your tax forms may be a bit daunting. Being bombarded by endless documents, while also trying to make the April 15 deadline, can cause a lot of stress on your part. It will take some practice at first, but once you get the hang of it, you will be able to do this financial task with your eyes closed.
A confusing area for first-time taxpayers may be trying to figure out what deductions to make. This process is important because the more deductions you make, the less you will have to pay back to the government. Here are some of the most common tax deductions you can make:
As a homeowner, you can make deductions on the interest you pay on your mortgage. A high interest rate can make your mortgage more expensive, being able to deduct this can give you a financial sigh of relief. There are a few parameters to this rule in order to qualify.
- Deductions must be on your main house or second home;
- Properties must be financed through a mortgage, line of credit, second mortgage or a home equity loan; and
- Cannot take the deduction to pay the mortgage of a home not owned by you.
Being charitable will not only help the needy, but it can also be beneficial for you once April 15 rolls around. If you have either made a contribution through part of your paycheck, donated clothes or bestowed any sort of gift to a qualified organization, you are allowed to deduct them. These can be beneficial deductions on your part, but there is a limit to what you can take out. You are only allowed to deduct up to 50 percent of your adjusted gross income when compared to your donations.
Some deductions have more restrictions to them, but that does not mean you can't investigate whether you can qualify for them. One of those deductions is income tax. You are allowed to deduct state and local income tax, as long as the income is not exempt from federal income tax.
Housing is one of the most common areas in which you can make deductions for your taxes.Mortgage interest is one deduction, but you can also make them for any taxes you pay on your home. State, local and foreign taxes on your home are all deductible as long as they are based on the appraised value of your home.
Visiting the doctor or getting complex dental work can be expensive, but you are allowed to deduct these areas. You can make medical deductions for the cost of physicians, surgeons, dentists and other medical practitioners. The deductions can be beneficial, as these costs can start to get expensive.