Tax deductions reduce your taxable income by accounting for expenses you’ve incurred. The IRS offers many ways to reduce your taxable income, from deducting childcare costs and mortgage interest to charitable donations and moving expenses.
Learn about new tax breaks for 2016 and which deductions are returning this tax season.
1. Standard Deduction
Even if you don’t have a lot of itemized deductions to file, you still qualify for a standard deduction for 2015, which is based off of your income. Below is a list of standard deductions based off income and how you plan to file:
2. Mortgage Insurance Premiums Deduction
If you obtained your mortgage insurance policy in 2007 or later, you might qualify for a deduction on the amount you’ve paid toward your mortgage insurance premium. However, as of mid-December, lawmakers haven’t extended the expiration date on this provision, according to The Motley Fool. If this measure isn’t extended, you won’t be able to deduct the amount you’ve put toward your mortgage insurance premium.
3. Tuition and Fees Deduction
Regardless of whether you take the standard deduction or itemize, you can deduct up to $4,000 in qualifying tuition and fees paid for yourself, your spouse or a dependent in 2015. The expenses must be for higher education. If you are married but filing separately or if another person can claim an exemption for you as a dependent, then you don’t qualify for the tuition and fees deduction.
4. State and Local Sales Tax
You have the option of deducting either your state and local income taxes or state and local general sales taxes paid. If you live in a non-income taxing state, deduct state and local sales taxes paid.
5. Cash Donations
If you itemize deductions, you can deduct cash donations to IRS-approved charities. You must have written record of your donation in order to deduct cash gifts, no matter the amount. A qualifying written record can be a copy of the bank record, a statement from the organization or a payroll deduction record.
6. Non-Cash Donations
If you itemize, you can claim the fair market value (FMV) of donated clothing, household items and stock. Fair market value is the price you otherwise could have sold the items at. If you plan to donate your car, make sure you are donating to a qualified charity, such as a 501(c)(3).
7. Donating Your Time and Talents
You can deduct certain expenses for charity work. For instance, you can deduct the cost of gas and oil if you use your car to get to and from the place you volunteer. If you don’t want to calculate the value per mile you can deduct, a standard mileage rate of 14 cents per mile is acceptable.
You can also deduct the cost of purchasing and maintaining uniforms you wear to hospitals where you volunteer.
8. Student Loan Interest Deduction
Even if you don’t itemize your deductions, you can deduct up to $2,500 in qualified student loan interest paid in 2015. You do not qualify for this deduction if your gross-adjusted income is more than $80,000, or $160,000 for married couples filing jointly.
9. Job Search Expenses
If you itemize, you can deduct expenses incurred while searching for a job in the same line of work as your current or most recent job. Expenses you can deduct include:
- Transportation, which includes a deduction of 56 cents per mile, parking, tolls and cab fees
- Preparing, printing and mailing out your resume
- Phone expenses
- Ad placement
- Fees related to job searches
- Employment agency fees
10. Moving Expenses
If you meet the IRS distance and time tests and moved for a new job, you can qualify for a moving expense deduction. Qualified expenses include the cost of moving your belongings and travel to your new home. The standard mileage rate is 23 cents per mile. You can also deduct the cost of lodging for yourself and household members.
11. Military Reservist Travel Expenses
If you travel more than 100 miles from home for service, you can subtract travel expenses from the income you report on your tax return. Qualifying expenses include transportation, meals and lodging.
12. Medical and Dental Expenses
You can deduct medical and dental expenses for you, your spouse and your dependents after your total medical expenses exceed 10 percent of your adjusted gross income (AGI). If you or your spouse is age 65 or older, you can deduct total medical expenses that exceed 7.5 percent of your AGI.
13. Tax Preparation Fees
Whether you did your own taxes or paid someone to do them, you can include the fees on your miscellaneous tax deductions list. Costs can include tax return preparation and electronic filing fees.
14. Mortgage Interest Deduction
If you itemize, you can deduct the interest paid on your mortgage. As part of the deduction, you can deduct interest paid on loans totaling $1 million or less. If you’re married and file separately, you can only deduct on loans totaling up to $500,000.
15. Mortgage Points
If you itemize, you can immediately deduct the points you paid to purchase or build your primary home.
16. Home Renovation Deduction
Most often, home renovation costs are not deductible on your tax return. However, if you make improvements to your home for medical purposes, such as adding entrance and exit wheelchair ramps and lowering cabinets for accessibility purposes, you can deduct these renovations as medical expenses. If these renovations increase the value of your home, however, they cannot be claimed as medical-related expenses, according to TurboTax.
17. State, Local and Foreign Taxes
Certain taxes imposed on you can be claimed as an itemized deduction on your tax return. Including state and local sales tax, you can also deduct: