Your accounting firm in Phoenix can help you balance your personal financial situation in relation to your business finances and expenses. As part of tax preparation, they can provide you with both your business and personal filings. Putting tax preparation work together, you should ask about itemized deductions and what they could mean for you.
Break it Down: What does “Itemized Deduction” Really Mean?
As part of your taxes, you should understand what defines the term “itemized deductions”. According to Nerd Wallet, they “are basically expenses allowed by the IRS that can decrease your taxable income.” Additionally, there are several types of Itemized Deductions that can make or break the difference for your personal tax liability year after year. As you should become aware of each type, here is a non-exhaustive list of the varying types of itemized deductions:
- Student Loan Interest Deduction
- Charitable donations deduction
- Medical Expenses Deduction
- State and Local Tax Deduction
- Mortgage Interest Deduction
Student Loan Interest Deduction With the Help of Phoenix Accounting Firm
Who is applicable for the student loan interest deduction? If you as an individual are reporting a gross income of less than $85,000 or as a couple filing jointly less than $170,000, then you can deduct interest paid on student loans. There are several occasions where this deduction applies, for example:
- Wage Garnishment and Legal Obligations. In any case, where you are required to pay off your student loans, you can still apply for deductions against interest paid.
- Loan on behalf of a child. Taking out a loan in your own name on behalf of a child still gives you the opportunity to apply for student loan deductions.
- Any qualified expenses incurred for education. Qualified expenses are for housing, books, tuition, and necessary expenditures.
- Your own education. Working and paying off your student loans while attending school, you can start receiving deductions now.
Donating to charitable organizations can help increase your itemized deductions throughout the year. An effective method to maximize your deductions is contributing assets other than cash. According to The Signatry, “giving capital assets such as stock, cryptocurrency, real estate, or business interest to a donor-advised fund may maximize your generosity and minimize taxes.” This form of deduction is very popular and can give you a significant break on this year’s tax filing.
Medical Expense Deductions
As a taxpayer, you may be eligible for tax deductions with any applicable medical expense as outlined by the current regulations from the IRS. Some of the top applicable expenses include alternative treatments, adaptive equipment, diabetes, and more. Speaking with your Phoenix accounting firm, together you can determine how you can increase your deductible expenses after a year of medical expenses.
Phoenix Accounting Firm Helps Calculate State and Local Tax Deduction
Any state and local income taxes which are classified as “withheld taxes” are eligible for deduction. Make sure to carefully review your W-2 and determine the exact amounts. If you have any taxes paid on real property, then you may be able to deduct an additional amount. There are some restrictions to what you can deduct as property taxes, here are some examples as outlined by the IRS.
Mortgage Interest Deduction
As a homeowner, you may be interested in how the federal government allows for mortgage interest to be deducted from your annual tax return. When deductions are made, you can decide between standard or itemized deductions. Standard deductions generally require less proof and paperwork, while giving you a flat dollar amount. Itemized deductions, on the other hand, require that you provide more proof and paperwork. Make sure you tax advantage of this important deduction and reduce your tax liability as much as possible.
Why itemized deductions matter to your business?
If you are a small business owner in the startup phase of your business, then you should know about this important deduction and how it can affect your business. Take special note of how your personal finances affect your business. Spending more at home can leave you strained for resources when building3 your business. Alternatively, smart spending can benefit both your business and your personal finances, giving you a tax advantage without having to sacrifice everything from your life.
How can your Phoenix accounting firm help with itemized deductions?
Additionally, as you prepare to file for this year’s taxes, take care in making sure that your figures are accurate. Providing the right data to your accountant can give you an excellent opportunity to get filed on time, without penalty, and take full advantage of any and all deductions and credits applicable to your current year’s tax return. Take time to review all the options available, you don’t want to neglect any important or specific details.
Remember Your End Goal
The objective of your tax deductions is to reduce the overall liability of your tax return at the end of the day. Make sure you take care and put in the necessary effort to take everything you can. The IRS won’t give you anything you don’t ask for, but if you ask and it’s legit, you’re more receptive to receiving the credits and deductions you need. This is important, especially if you are working to free up cash or working capital for your next small business self-funded venture.
Phoenix Accounting Firm Offers Tax Planning in Advance
As part of the tax preparation services, they also offer clients an opportunity to plan ahead for next year’s taxes. This can significantly increase the organization within a tax year and keep ahead of schedule. Another advantage is already knowing what kind of expenses are going to be more beneficial in your next tax filing. Not knowing, on the other hand, is scary and doesn’t give you an opportunity to apply for new and better tax credits and deductions. Look for tax planning options as you search for the right tax preparation service that fits you and your business needs.
Whether finding expenses for itemized deductions or preparing for next year’s return, it’s never too early to start thinking about your tax filing options. Make sure you keep in touch with your accountant frequently and ask any questions that you may have. Learning from your accountant will help guide you to make more informed, better-quality decisions in the future.