When it’s tax season, many people wonder if they can deduct certain personal expenses. While the IRS allows specific deductions, it’s essential to know which ones apply to you and how to take advantage of them without breaking any rules. Here’s a simple guide to help you navigate this.
What Are Deductible Expenses?
Deductible expenses are costs the IRS permits to lower the amount of income you’re taxed on. This means they can help you pay less in taxes. However, not all personal expenses qualify, so it’s important to carefully review which ones apply.
Examples of Deductible Expenses
Although the 2017 tax law changes reduced the number of personal deductions, you can still take advantage of some:
- Mortgage or Student Loan Interest: If you have a mortgage or are paying off student loans, you may qualify for these deductions.
- Medical and Dental Expenses: In 2024, if you spend more than 7.5% of your income on things like doctor visits, prescriptions, or health insurance, you may be able to deduct those costs.
- Charitable Donations: Contributions to nonprofit organizations can be deductible. Make sure to save your receipts.
- State and Local Taxes: Property taxes and state income taxes can be deducted, but only up to $10,000.
- Educational Expenses: Some tuition and materials for higher education may qualify, but they must meet specific requirements.
Expenses That Are Not Deductible
- Rent
- Utility bills (water, gas, electricity)
- Personal meals
- Hobbies or recreational activities
- Credit card payments
Standard Deduction vs. Itemized Deduction
When filing your taxes, you can choose between the standard deduction and itemizing your deductible expenses. In 2024, the standard deduction is $14,600 for single filers and $29,200 for married couples filing jointly. If your deductible expenses exceed these amounts, it might be worth itemizing.
Tips for Charlotte, North Carolina Residents
- Property Taxes: While Charlotte has relatively low property taxes, make sure to include them if you own a home.
- Vehicle Registrations: Although you can’t deduct the total registration cost, some fees related to your vehicle’s value might qualify.
- State Tax Credits: North Carolina offers unique credits, like the Child Care Contribution Credit, which can help you save money.
What Documents Do You Need?
To support your deductions, keep the following handy:
- Receipts and invoices
- Bank statements
- Donation letters
- Proof of mortgage or loan payments
Consult an Expert
Tax rules can be complex, and what works for one person might not apply to another. A tax professional familiar with federal and state laws can help you identify the right deductions and ensure you stay compliant with all regulations.
