For the 2021 tax year, the standard deduction is $12,550 for a single taxpayer and $25,100 for a married couple filing jointly.3 Most people take the standard deduction, but if your qualifying deductions exceed this threshold, you should itemize. Similar to previous years, there is no limitation on itemized deductions.4
Here are the deductions you may claim:
- Unreimbursed medical and dental expenses that exceed 7.5% of your adjusted gross income (AGI)5
- Interest paid on up to $750,000 of your home loan6
- Interest on home-equity loans that were used to substantially improve your home7
- State and local taxes such as property and sales tax paid the previous year, up to $10,0008
- Charitable contributions up to 100% of your AGI9
- Casualty and theft losses worth over 10% of your AGI10
Assess your deductions and determine if they exceed the standard. If so, you may benefit from itemizing.
3. Gather Info for Above-the-Line Deductions
Above-the-line deductions can include interest paid on student loans, contributions to a savings account, and alimony payments. If you’re self-employed, you can also claim above-the-line deductions on health insurance premiums. Regardless if you decide to itemize or claim the standard deduction, you are also able to claim above-the-line deductions. Take some time to gather proof of these deductions, as they can help reduce your tax bill.
These tips cover the basics, but there are a lot of unique tax situations. To help ensure you minimize your tax liability, you may want to consult with a tax professional.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
3, 4 https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2021
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