4 Tax Deductions You May Be Unaware Of for your North Bethesda Business

Itemized North Bethesda tax deductions give many American wage earners a chance to pocket more income, rather than hand over their hard-earned cash to the government. If you keep good records, deductions can mean more money for you and less for the Internal Revenue Service (IRS).

To help reduce the amount of income you have to pay tax on, you can claim either the standard deduction, which is allowable for all taxpayers, or itemized deductions, which can make sense if they exceed your standard deduction.

There are also a number of deductions that come in the form of tax credits or direct reductions of your income. Here are a few that you may or may not be familiar with that you may be able to use to reduce the amount of tax you owe the IRS this year.

Sales Taxes

State and local income taxes have long been used as a tax deduction, but many Americans are unaware that they can opt instead to take a deduction for sales taxes. While the deduction for state income taxes is usually larger, particularly in states like California with higher income tax rates, some states have no income tax at all. In this case, deducting your paid sales taxes may still allow you to get a tax break, as long as your itemized deductions exceed your standard deduction.

Mortgage Points

One of the many benefits of being a homeowner is that you can deduct a number of home-related expenses. Mortgage interest and property taxes are two of the most well-known, but you can also deduct any points you pay to acquire or refinance a mortgage. Mortgage points are upfront cash payments you make to reduce the interest rate that you’ll pay on your mortgage. As the points are essentially prepaid interest, they are deductible in the same way as regular mortgage interest.

HSA Contributions

Contributions to IRA accounts and 401(k) plans are some of the most popular deductions available to taxpayers. Yet, the relatively overlooked health savings account, or HSA, also qualifies as a tax-advantaged plan, meaning contributions are tax-deductible. When combined with the tax deferral of earnings within an HSA and the tax-free withdrawals allowed for qualified distributions, the HSA should be on the radar of more American taxpayers.

Bad Debts You Can’t Collect

This deduction is a bit more obscure, but it likely happens to taxpayers more often than they would like to admit. Just like a business, if you have a bad debt expense, you can write it off as a deduction. In the case of individual taxpayers, this means that if you lend money to a friend and they don’t pay you back, you can write off the amount of the debt on your taxes. You just have to be in a position to prove to the IRS that the debt is truly uncollectible.

At the end of the day, the slips of paper you cram into your wallet can mean more money in your bank account this tax season. Hold onto receipts and records for services and keep a file throughout the year, so you have a record of even the smallest expenses. As those expenses add up, they may ultimately lower your tax bill. Hiring a knowledgeable CPA can make ALL the difference in the world when it comes to finding applicable deductions for you! North Bethesda CPA is here to help. In fact, we would love to see you over on Facebook or Instagram.