There must be various instances wherein you paid your taxes only to realize that you could have saved that amount by showing your expenses. There are several tax deductible items on which you may have spent a lot of money and still not shown it to the authorities, so as to claim tax deductions. So this is where we want to help you. We give you a list of some of the most common tax deductible items, which is sure to save you a lot of money.
What Are Tax Deductible Items
Tax deductions are allowed for a variety of items, especially on those items where you spend money to produce income for someone else. However, there are several limitations to such deductions. Usually, tax deductions are allowed when you spend money for the benefit of someone else or invest it for future use. For example, if you buy insurance, it may be tax deductible. The reason being, when you pay the premium to the insurance company, your money is invested by the company and after a particular period of time, you can withdraw the money and you can use it in any way you please.
Tax Itemized Deductions
Usually you, as a tax payer, have the choice of itemizing or standardizing your deductions, thereby using it to lower the amount of taxes you pay. Whether you standardize or itemize depends on the expenses you have incurred in the financial year. You may have paid for interest rate, charitable contributions, etc., which are tax deductible. In case the amount you spend is more than the standard deduction, itemizing can be beneficial. In addition, there are tax deductions for home improvements as well, which you can avail of.
Tax Deductible Items List
There are several tax deductible items which you can show to lower your taxes. Donations made to charitable institutions, health insurance premiums, loans which you may have taken, expenses on educating your children, etc. are all tax deductible. Moreover, any kind of investments which you may have, such as shares or mutual funds are also tax deductible. In case you use the dividends of mutual funds to buy extra shares, then you need to take care, as every reinvestment will increase the amount of taxes you would have to pay, thereby reducing your profit margin. So while filing for taxes you need to show that too, so as to claim tax deductions. There are also charitable contributions tax deductions, which you should also know, and which can help you lower your taxes.
In case you are self-employed or running a business, there are several expenses which you have to incur. You need to make a list of all these expenses and while filing for taxes, you need to show them, so that you can avail self employment tax deductions. Tax deductible items for business includes capital investments which you make for running your business, payment of salaries to employees, etc. You can also claim tax deductions if you use your home or apartment for business. For home business tax deductions, you need to prove that you don't have any other place where you are running your business. Some of the other tax deductible items include rent which you may be paying, repairs which you may have to do, paintings, etc.
Teachers of schools and colleges need a lot of money for books, stationery, computer equipment, etc. And all such items are tax deductible. However, you need to fulfill certain criteria for claiming tax deductions, the primary one being working in a private or public secondary or elementary school. Moreover, you need to work for a minimum of 900 hours as a principal, councilor, instructor or teacher in that educational institution.
It's not at all difficult to list down the items, but the toughest part is remembering to collect receipts and keep them in a safe place. In case you have a doubt whether a particular item is tax deductible or not, it's always better to consult a tax specialist so that you know all the details.