Income Tax Return Deductions
A tax deduction reduces your Adjusted Gross Income or AGI on your income tax return, thus either increases your tax refund or reduces your taxes. It's not just about how much income you make but how much you get to keep of your own pie.
When you prepare and eFile your taxes on eFile.com the tax app will prompt you for applicable tax deductions and tax credits. This will assure you that you don't overlook any qualified deductions.
Tax credits are similar to tax deductions, but they reduce your tax bill dollar for dollar. We will compare tax deductions with tax credits in more detail and list the most popular tax deductions you may qualify to claim on your tax return.
Tax deductions can be complicated, so let eFile.com help you with your deductions if this information overwhelms you. We will determine which deductions are best for you based on your answers to a couple of easy tax questions. Then, we will calculate the deduction amount for you. It's that simple!
Your Income Tax Return Deductions
What is a Tax Deduction?
Tax Deductions reduce your Adjusted Gross Income or AGI
and thus your Taxable Income
on your Income Tax Return. As a result your overall Taxes reduce: your Tax Refund will increase; Taxes you owe decrease or you might be tax balanced - no Refund or owed Taxes.
Deduction Expense Claim Period
Generally, eligible Tax Deduction Expenses have to occur during the given Tax Year: Jan. 1 - Dec.31 so you can claim them on your Tax Return. The exception to this can be retirement or health plan contributions, which can be made during a time frame in the following calendar of the given Tax Year; usually not beyond the Tax Return Due Date
. Please check the specific deadlines of the plan(s).
These are deduction methods on how you apply deductions on your Tax Return Form. The eFile.com tax app will determine which is most tax advantageous to you, whether to itemize or use standard deductions on your return. Simply enter your tax data and get the results when you prepare on eFile.com. Compare in detail standardized with itemized Deductions.
Claim one or more Dependents on your Tax Return by entering the amount of Dependents you wish to claim, the eFile.com app will do the rest for you. It's for you to determine whether a person is indeed a qualifying Dependent in the eyes of the IRS. We make it simple for you to find out via the DEPENDucator tool. Simply answer a few questions on how a person relates to you and will will get the answer: Start DEPENDucator now.
If a person does not qualify as a Dependent they might qualify as a Qualifying Relative. Find out via the RELucator.
Tip: Even though it says Relative, the person does not have to be a Relative of yours (e.g. boyfriend, girlfriend, etc.)
As mentioned earlier, you might be able to claim a person as a Qualifying Dependent or Relative. Here at eFile.com we make it easy for you to find out, before you prepare and e-File your Taxes. In most cases, if the person in question is not your child, start with the RELucator
tool first. Always use both tools if in doubt or if one of the tools gives you No as an answer. After you have used the RELucator check the DEPENDucator
Marriage, Divorce, Children, Job Changes, Death, Home Purchase or Sale, etc. are all life changing events that can have implications on your Tax Return Filing Status and eligible tax deductions. If any of these or other Life Changing Events happened to you, click and check this list
. When you prepare and eFile your Taxes, you will be asked about these and other Tax Deductions. You will have to enter the amounts and the eFile.com app will do the math for you.
The Mortgage Interest Deduction as reported to you on Form 1098 Line 1 can be claimed as a deductible expense on your tax return. Beginning in Tax Year 2018 the amounts of qualified residence debt or loan amounts changed.
All you have to do is enter the interest amount - from Form 1098 from Line 1 - during your tax interview on the eFile.com app and the app will apply either the itemized deduction or standard deduction method
- whichever method is most tax advantageous for you - when you prepare and eFile your Taxes. As a mortgage owner you can also deduct points paid on the purchase of real property. Points are referred to interest paid in advance or simply pre-paid interest made on a home loan to improve the rate on the mortgage offered by the lending institution.
Details on Canceled Mortgage Debt.
You can deduct State And Local
real estate and personal property Taxes
(SALT), as well as either state and local income taxes or general sales taxes up to $10,000. Technically, the itemized method is required to claim SALT. However, it might not be in your best interest if the new standardized deduction amount exceeds that of the itemized amount. The eFile.com tax app will work for you by applying the best deduction method for you - either standardized or itemized deduction. More SALT details.
Are you working from home as self employed or independent contractor with 1099 type income? Find out which related home expenses you might be able to deduct.
As of Jan. 1, 2019, you can only deduct the amount of the total un-reimbursed allowable medical care expenses for the 2019 tax year that exceeds 7.5% of your adjusted gross income. Let's say your AGI is $40,000 and your medical expenses are $5,000. You could claim $40,000 * 7.5% = $3,000. As $2,000 of the $5,000 exceeds the 7.5% you can deduct $2,000 for tax year 2019. For 2018 the limit was 7.5% or $40,000 * 7.5% = $3,000 or $2,000 in medical deductions. You can deduct medical expenses such medications, dental treatments, eye doctor visits, hospital fees and services. Details on Medical Expenses
Health Savings - HSA - , Flexible Spending - FSA - are Medical Savings Accounts (MSA) that can be used as options to deduct for medical expenses. A Health Reimbursement Arrangement - HRA - is an employer sponsored plan to reimburse for medical expenses. Details on Medical Savings Accounts.
Find out which charitable contributions and donations you can claim on your Tax Return as a deduction. The easiest way to find out is to start a free tax return on eFile.com
as the app will guide you through this before you efile your return.
There are no direct child care expense deductions you can claim, however you should explore if you are eligible for the Child Care Tax Credit via the CAREucator Tool.
It's easy to use and gives you instant answers. Did your receive dependent care benefits from your employer during the year? If so, you may be able to exclude some or all of them from your income. You can complete Form 2441, Part III on eFile.com when you prepare your taxes and the tax app will determine your child care tax credit amount.
While not a deduction, the Adoption Credit is a tax credit designed to help with the expenses related to adopting a child under the age of 18 (including a child with special needs). When you start a free tax return on eFile.com, include your adoption expenses and the credit will automatically be calculated and reported for you by the tax app and applied to your tax return. Thus, no complicated math or guessing what is required by you.
Gain a comprehensive overview on the complex subject of Retirement Plans, maximum and minimum Retirement contributions, early or minimum withdrawals and how all these factors can impact your Taxes.
Student or Education related Tax Deductions
and Student Tax Credits
have changed since the latest Tax Reform in 2018. Education Savings Plans or 529 Plans can now be used for K-12 Student education as well. The Student Tuition and Fee Deduction expired at the end of 2017. Many types of educational assistance are tax free if they meet certain requirements. This is often referred to as tuition reduction and you don't have to include a qualified tuition reduction in your income on your tax return.
A general overview of employee related job expense deductions (e.g. travel): get the Details now.
For Car Mileage Expenses, Teacher, Educator related expenses, see further below.
Did you use your car for business, medical, or charitable purposes? One of the following requirements as an employee have to be meet:
- Qualified performing artist
- Fee-basis state or local government official
- Armed forces reservist
- Impairment-related work expenses
- Your employer entered code "L" for box 12 of your W-2
Car Mileage Rates by Tax Year
The Qualified Business Income deduction (or QBI deduction) allows you to deduct up to 20% of qualified business income for most self-employed taxpayers or small business owners.
Find out how to apply Gambling Losses on your Tax Return.
You can deduct casualty and theft losses from a federally declared disaster area.
Interest you paid on money you borrowed for an investment property is generally deductible. This does not include interest from passive activities or securities that generate tax-exempt income.
Moving Expense Deduction
The moving expense deduction was effectively suspended - due to the 2018 Tax Reform Act - starting with tax year 2018
until the 2026 tax year. If you are on Active Military Duty
you can still deduct relocation expenses based on a military relocation order. Some states
- like Massachusetts - still have the moving expense deduction for everybody. Tax Tip:
If your employer asks you to move, you might want to ask for an expense reimbursement, however it would be taxable
Home repairs and contributions to political campaigns are only two examples of a wide range of expenses you cannot claim as a Tax Deduction on a Tax Return. However, this list is dynamic and can change from Tax Year to Tax Year. The eFile.com tax app will not list nondeductible expenses when you prepare and eFile your Taxes, thus you don't have to worry about claiming only valid Deductions.
Recent and ongoing Tax Reforms extend or let tax breaks expire. See how tax year 2019 is effected.
Tax Deduction Planning Tips
Keep up-to-date on Tax Deduction changes throughout each Tax Year. For example, tax plan for your deductions when Life Changing events (e.g. Marriage, Child, Job, Education, etc.) take place. Sign up now and get Tax Tips and Tax Win.
Not only know the latest Tax Deduction Changes, but also have on overall Tax Return Plan in place. For example, use the eFile.com Taxometer to calculate your Tax Withholding based on your Tax Return Goals. In other words, taxercise your Paycheck. Use the eFile.com Taxometer now.
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