Published on 6/29/2020
With less than three weeks for the Tax Day, all American residents, expats, and those living in different corners of the world have buckled up. The Internal Revenue Service (IRS) had given a 90-day extension to taxpayers for filing their income tax and other estimated payments because of the coronavirus pandemic.
July 15 is approaching, and with each passing day, taxpayers are getting anxious. Some have already filed for an extension while others mull over the prospect of registering for an extension. There are also the law-abiding citizens who have already paid their dues and given the system a thumbs up.
And if you have NOT yet paid their dues to the Federal and State Governments, there might be a chance for you to save some money. Before you file your taxes, the Federal Government allows certain deductions, saving money on taxes.
The coronavirus season may have made everyone’s finances sour, which might be a way to revive them. The IRS has even expanded the horizon of deductions before tax filing. Read on to know the top deductions that you can still be entitled to as a tax-paying citizen. And Lord knows that every penny counts during these uncertain times.
Deductions under medical expenses
Your medical expenses can get you a tax credit if the amount spent on health and medical bills is more than 7.5% of your modified adjusted gross income. The bills could include anything from prescribed medications, hospitalizations, hospital transport costs, medical treatments, and even money contributed to the Health Savings Accounts (HSA).
Deductions under child-care
If you have listed your child/children as a dependant, you could claim $2,000 per child under the Child Tax Credit. As per the guidelines, the dependent could even be your foster kid, niece or nephew, or even your grandchild. The only given is that they should be under 17 years of age to qualify as a dependent.
A similar Adoption Tax Credit lets you file for a deduction if you have adopted a child. As a single person, if your modified adjusted gross income (MAGI) is less than $211,160, you can claim all the government expenses for your adopted child.
Deductions under family-care
If you have listed dependents who are disabled, you can stand to claim up to $3,000 per dependent from the Government. You can apply for the same as deductions before filing your income tax before July 15. The disabled dependent could be your spouse, parents, or children.
Deductions under student loans
Under the Student Loan Interest Deduction, you can subtract $2,500 or the amount paid for student loan interest. The deduction is only tagged for individuals earning less than $65,000 per year. However, you are still eligible for student loan interest deduction, but the amount will get reduced from $2,500. The deduction will not apply to you if your modified adjusted gross income is more than $80,000.
Deductions under higher education
If you are currently enrolled in a higher studies program in the country, you stand to be entitled to tax deductions of up to $2,000 under the Lifetime Learning Credit initiative. The scheme includes small courses meant to enhance job skills and conventional undergraduate and postgraduate programs. However, you will lose eligibility if you earn more than $68,000 as an individual or $136,000 as a couple.
The American Opportunity Tax Credit is a boon for newly graduated students in the country. You could file for a flat $2,500 as a tax credit if you have completed less than four years of higher education. Additionally, if the deduction makes your income tax owed to the Government zero, you could GET up to $1,000 from the Government.
If you have three or more children as dependants, you can file tax deductions of up to $6,557 under Earned Income Tax Credit. To be eligible, you should be in the moderate to low income group and have less than $3,600 as income from investments in a year.
The July 15 deadline still has half a month to go. The IRS has loosened restrictions on filing for tax deductions and extended the deadline before July 15. This could be your make-or-break chance to save on some money and stash it away for more emergent times.