Tax Deductions to Help Simple Filers Save Money

Simple filers have several straightforward opportunities to lower their taxes via tax deductions.  They fall into two broad categories:

  1. Adjustments to Income
  2. Itemized Deductions

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Adjustments to Income

IRA Deduction

You have until April 15, 2013 to make a contribution to a regular IRA for the 2012 tax year.  As long as your income is less than certain limits, you may take a tax deduction for your IRA contribution.  No deduction is available for a Roth IRA contribution.

Moving Expenses

If you moved far enough during 2012 for a job, you might be eligible to take a deduction for expenses related to moving you, your family, and your possessions to your new home.  If your new workplace is at least 50 miles farther from your old home than your old job location was and you work for most of the next year (39 out of the following 52 weeks), your expenses may be tax deductible.

Alimony

Most alimony you pay during 2012 is taxable income to your ex-spouse.  It’s also deductible for you.

Student Loan Interest

Up to $2,500 of the interest you paid during 2012 on most student loans is tax deductible.  You’ll probably receive a Form 1098-E, indicating the total amount of student loan interest you paid.  If the amount you paid exceeds $2,500, then you qualify for the maximum deduction. If you paid some lesser amount, you can deduct the amount you actually paid.

Common Itemized Deductions

Charitable Donations

Gifts you make to 501(c)3 organizations (i.e., most legitimate charitable organizations) are tax deductible. Gifts can include not only cash, checks, or credit card charges, but also donations of clothing and household items.  Make sure you get donation receipts for your files, and then deduct your charitable donations as itemized deductions.

Mortgage Interest

Interest you pay on your mortgage is tax deductible. Recall the deduction isn’t for your entire mortgage payment – it is only for the interest portion. Fortunately, your bank will send you a Form 1098 in January indicating the amount of your 2012 mortgage payments attributable to interest, and it is this amount you can deduct.

State and Local Taxes

While you can’t deduct your federal income tax, your Social Security, or Medicare taxes, you do catch a tax break for the state income tax and property tax you pay – if you itemize.

Typically, each of the above tax deductions are both simple to claim and worth the additional time it takes to prepare your tax return.  Plus TurboTax helps you get all of the tax deductions and credits you’re eligible for.  It is worth it to ensure you keep more money in your pocket!

Michael Rubin

Author of the bestseller Beyond Paycheck to Paycheck, and the upcoming The Savings Solution, Michael B. Rubin is a Certified Public Accountant (CPA) and a CERTIFIED FINANCIAL PLANNER professional. In addition to his experience providing sophisticated financial advice to affluent clients, Michael has been a key source of information for over a decade to countless others. He speaks passionately about and provides guidance on virtually all personal financial planning topics. Michael has appeared in various media, including radio and TV stations across the country, plus national media such as CNN Money.com, latimes.com, The Wall Street Journal, SmartMoney.com, Chicago Tribune, Financial Advisor Magazine, and Investment News. Prior to founding Total Candor LLC, Michael worked in the personal financial services practices of two of the former "Big Six" accounting firms. Subsequently working for several years as a new venture executive for Toys "R" Us, Inc., he made sure that he never actually grew up. He holds an undergraduate business degree from the Ross School of Business at the University of Michigan and an MBA from the Kellogg School of Management at Northwestern University. Michael lives in New Hampshire with his wife and children.

Comments (3) Leave your comment

  1. Is it a good idea to forward your federal tax refund to next year’s tax filing? I am expecting another 5000 on top of what I made this year and only received about 600 refund this year.

  2. is there a limit to the amount of deductions you can take off if you itemize and clai earned income credit other words do you have to have a certain amount of mortgage interest and taxes to itemize

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