The federal government imposes taxes on wages, salaries and other forms of income, but claiming tax write-offs or deductions can allow you to keep more of your income. Tax deductions are available on a variety of common expenses, including certain home-ownership, business and work-related costs. Higher education expenses and medical expenses are also deductible for taxpayers who meet certain requirements.
Two common expenses related to home ownership are deductible on income tax returns: property taxes and home mortgage interest. Property taxes are deductible on any number of homes, so long as the taxes are based on the assessed value of your home and levied uniformly on all properties in your jurisdiction. The mortgage interest deduction applies to up to $1 million in mortgage debt on a main home and one second home.
Self-employed workers like small business owners and independent contractors can write off a variety of business expenses on tax returns. Deductible business expenses include the cost of running a home office, operating a vehicle for business purposes, business travel, paying employees, retirement plans and business-related rent, insurance and taxes. Expenses partially attributable to business and partially attributable to personal activities are generally deductible based on the proportion of business use.
Unreimbursed Employee Expenses
Certain job-related expenses are tax-deductible for employees who do not receive reimbursement from an employer. Deductible employee expenses include union dues, tools, protective clothing like hard hats, safety glasses and boots, occupational taxes, licenses and legal fees related to doing or keeping a job. The deduction for unreimbursed employee expenses is subject to a 2 percent income limit: You can deduct expenses to the extent that they exceed 2 percent of your adjusted gross income.
Higher Education Deductions
The Internal Revenue Service offers a deduction for college tuition and fees and a deduction for student loan interest. The tuition and fees deduction applies to up to $4,000 of college tuition, required fees, course-related books, supplies and equipment for single taxpayers with a modified adjusted gross income of $80,000 or less and joint filers who make $160,000 or less. The student debt deduction applies to up to $2,500 of student loan interest for single taxpayers with a MAGI of $75,000 and joint filers who make $150,000 or less.
Medical and Dental Expenses
Medical and dental expenses that exceed 7.5 of your adjusted gross income are tax deductible for the 2012 tax year. Deductible expenses include insurance premiums; fees paid to doctors, dentists, surgeons, chiropractors and psychiatrists; and payments for in-patient hospital care or nursing home services. The income limit for the medical and dental expense deduction is set to increase to 10 of adjusted gross income after the 2012 tax year.
- Internal Revenue Service: Topic 503 - Deductible Taxes
- Internal Revenue Service: Topic 505 - Interest Expense
- Internal Revenue Service: Deducting Business Expenses
- Internal Revenue Service: Publication 529 - Main Content
- Internal Revenue Service: Tax Benefits for Education: Information Center
- Internal Revenue Service: Topic 502 - Medical and Dental Expenses
Gregory Hamel has been a writer since September 2008 and has also authored three novels. He has a Bachelor of Arts in economics from St. Olaf College. Hamel maintains a blog focused on massive open online courses and computer programming.