How to Reduce Tax Deductions
- 1). Determine if you have enough deductions to itemize. The best way to see all the allowable deductions is to review Schedule A of Form 1040. This is where you claim the itemized deductions. You will also find an instruction sheet for Schedule A. The instructions provide details about each deduction to see if you qualify. List all of your allowable expenses and compare them to the standard deduction for your filing status. If allowable expenses total more than the standard deduction, you should itemize your deductions for the largest return.
- 2). Deduct expenses. It is a good idea to keep receipts and other records in case you are audited by the IRS. If you use a vehicle for work, you can deduct the mileage. If you own the business, you can deduct your vehicle lease payments.
- 3). Deduct charitable contributions. A donation of cash or property to a qualifying non-profit organization can be deducted. If donating property, provide an estimate of the fair-market value. You are not able to deduct time spent volunteering. You are able to deduct mileage and gas spent to travel to the organization.
- 4). Deduct 401(k) contributions. If you meet the income requirements, you might be eligible for this deduction. You would have to have been a participant in a 401(k) plan with specific attributes. Your employer must also have filed Chapter 11.
- 5). Explore hidden deductions. Some people overlook deductions that are available to them. Some commonly overlooked deductions include home loan points, student loan interest, tuition fees, medical expenses and charitable travel. Students might also qualify for credits to help lower their taxable income. The Lifetime Learning Credit is a one-time credit for college students.
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