What You Need to Know About Tax Deductions

Making the Most of Your Tax Deductions

Understanding tax deductions is key to lowering your tax liability and maximizing your savings. This guide will walk you through what tax deductions are, how they work, and how you can claim them to reduce your tax bill effectively.

What Is a Tax Deduction?

A tax deduction reduces your taxable income, which in turn decreases the amount of tax you owe. By subtracting the deduction amount from your income, you lower your overall taxable income, leading to a smaller tax bill. Knowing how to leverage these deductions can result in significant savings.

How to Claim a Tax Deduction

There are two primary methods to claim tax deductions: the standard deduction and itemized deductions. Understanding the difference between these options will help you decide which is more beneficial for your situation.

Standard Deductions

This deduction is a flat amount that reduces your adjusted gross income (AGI) unconditionally. The amount you can deduct depends on your filing status:

• Single or Married Filing Separately—$14,600 for 2024
• Married Filing Jointly or Qualifying Surviving Spouse—$29,200 for 2024
• Head of Household—$21,900 for 2024

Itemizing Deductions

Itemizing allows you to list specific deductions that exceed the standard deduction, potentially lowering your taxable income further. Common deductions include:

• Medical Expenses: Deductible if they exceed 7.5% of your AGI.
• State and Local Taxes (SALT): Capped at $10,000.
• Mortgage Interest: Interest paid on home loans can be deducted.
• Charitable Donations: Donations to qualified charities are deductible.

For a full list on deductible expenses, please refer to IRS webpage. While itemizing can offer greater savings, it often requires more detailed record-keeping and documentation. Consulting with a tax professional can help you navigate the complexities of itemizing.

Itemized vs. Standard Deduction: Which Is Better?

Choosing between the standard deduction and itemizing comes down to which option offers greater savings:

• Itemize if your total deductions exceed the standard deduction. This can lead to a lower tax bill, but be prepared for more paperwork and proof of your deductions.
• Standard Deduction is typically easier and faster, especially if your itemized deductions don’t surpass the standard amount.

If you’re married and filing separately, both spouses must choose the same deduction method.

A Valuable Tax Deduction: Charitable Contributions

One tax deduction to keep in mind, especially around the holidays, is for charitable contributions. In 2021, U.S. taxpayers could deduct up to $300 in charitable donations even if they took the standard deduction. For married couples filing jointly, this amount increased to $600. Remember, the deadline for making charitable donations to qualify for the 2021 tax year was December 31st.

Get Expert Help with Your Tax Deductions

Determining the best way to claim your tax deductions can be complicated. CKH Group’s tax professionals are here to help you make the right choice. Contact us today for a free consultation and ensure you’re maximizing your deductions and minimizing your tax liability. You can also contact us at 1-770-495-9077 or email us at info@ckhgroup.com

The above article only intends to provide general financial information and is based on open-source facts, it is not designed to provide specific advice or recommendations for any individual. It does not give personalized tax, financial, or other business and professional advice. Before taking any form of action, you should consult a financial professional who understands your particular situation. CKH Group will not be held liable for any harm/errors/claims arising from the articles. Whilst every effort has been taken to ensure the accuracy of the contents we will not be held accountable for any changes that are beyond our control.