If you itemize your personal deductions on your return rather than accepting the standard deduction, you can only claim the majority of the top individual tax deductions. Only over 11% of filers now itemize due to the almost doubled standard deduction in 2018. The standard deduction for single filers in 2022 is $12,950, while for married couples filing jointly, it is $25,900. Additionally, several itemizers’ personal deductions were scaled back or abolished. You itemize only when your personal itemized deductions are more than your standard deduction. Since tax deduction is a complex subject, one must consult tax law firm Virginia Beach.
Top personal deductions for individuals
1. Mortgage Interest
You can write off the mortgage interest—but not the principal—you pay on a loan backed by your primary dwelling or second home if you itemize your deductions. You must make the repayments, which are notified to the IRS by your lender, to be eligible for the deduction.
Interest on house loan consolidation debt up to $1 million is exempt for first and second homes acquired before December 15, 2017. For homes acquired after December 15, 2017, homeowners can deduct only up to $750,000 in acquisition debt for their first and second properties. This 25% drop in the deduction for mortgage interest is projected to last from 2018 through 2025. However, the decrease does not apply to recapitalizations of properties acquired before December 15, 2017, as long as the fresh loan does not exceed the value of the refinanced debt.
You can deduct state and local taxes if you itemize, comprising (1) real estate taxes and (2) income tax or sales tax Virginia Beach, whichever one is larger. Previously, there was no cap on this exclusion. However, payers may deduct up to $10,000 in local and state taxes annually from 2018 through 2025. This $10,000 limit is applicable to both married and single filers and is not inflation-indexed.
If you itemize donations, you can exclude any cash or noncash donation you make to a qualifying nonprofit organization. You must have evidence for every cash contribution, even if it is less than $250. You must get a receipt or acknowledgment from the nonprofit organization for any noncash (property) donations and cash commitments exceeding $250. You must report noncash (property) contributions of more than $500 on Form 8283, Noncash Charitable Contributions, along with your tax return.
Taxpayers who do not itemize their deductions may deduct $300 of qualifying charitable donations as an “above the line” deduction in 2020 and 2021 under the Coronavirus Aid, Relief, and Economic Security (CARES) Act (married taxpayers filing jointly may deduct $600 in 2021).
4. Medical Expenses
If you itemize your deductions, you can deduct any medical and dental expenditures that surpass 7.5% of your AGO. Eligible medical costs include both premium payments for health insurance and out-of-pocket spending for you and your dependents that are not protected by insurance.
If you have a qualifying Health Savings Account (HSA), you may deduct your donations from the account and don’t have to pay taxes on the interest you earn. To open an HSA account, you need to have a high-deductible health plan that complies with the HSA regulations. You may use the funds in your HSA account to pay for practically any medical bill.…