Lowering your tax bill means more money in your pocket. One way to do this is through tax deductions. A deduction lowers the income you’re taxed on, which can result in a lower bill. Understanding tax deductions doesn’t have to be difficult. Here are a few tips on how to maximize your tax deductions.
Understand the Standard Deduction
The standard deduction is a deduction that is available to everyone. It’s a set amount but can change from year to year based on the current tax bill. You can find the current standard deduction online by visiting the website of the IRS. Taking the standard deduction makes filing your taxes easier since itemization or additional forms aren’t required.
You can choose not to take the standard deduction by itemizing your deductions for the tax year. If you have a significant amount of deductions, this can be very valuable to you. You could lower your taxable income beyond what the standard deduction gives you. Just make sure that your deductions are qualified to avoid a painful audit later. You can consult a tax professional to better understand which deductions apply to you. A quick search for income tax services San Mateo CA can help you get started.
Plan Your Deductions
If you have several qualified deductions that put your total itemized deduction close to the standard deduction amount, consider donating to charity to push your itemized total up. Another popular deduction that benefits from planning is the residential energy credit. Homeowners can deduct 30% of solar energy installations. If you know your deductions for the year are likely higher than the standard deduction, installing a solar energy system could lower your tax bill even further.
Understanding tax deductions is a great way to lower your overall tax bill. Keep these tips in mind when considering your deductions come tax season.