Simple filers have several straightforward opportunities to lower their taxes via tax deductions. They fall into two broad categories:
- Adjustments to Income
- Itemized Deductions
Adjustments to Income
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.
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.
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
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.
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!