Let’s talk about the elephant in the room. We’re now in the heart of tax season and you’re likely not happy about it. Trust me, I’m NOT either – but let’s talk about some things that may help you better understand your tax obligations to Uncle Sam.
Hey MoneyLion, my name’s Austin Hankwitz and I talk about personal finance and investing online. I grew up in a small town in northeast Tennessee and, probably like you, I definitely did not learn enough about taxes in high school or college. But that’s alright – there’s no better time than the present to learn more.
First – let’s have a quick refresher on deductions. They’re exactly what they sound like – specific expenses you’ve incurred this year that are deductible from your income and can lower your tax bill. One of the most puzzling things about taxes is knowing what you can and can’t claim.
For example, did you know that you can claim state sales taxes as a deduction? On your tax return, you can choose between deducting state & local income taxes or state & local sales taxes. For states like Florida, Texas, and my beloved Tennessee – this means you may want to consider writing off sales taxes because you already don’t have state income taxes. Keep in mind, the total of your deductions for state and local income, sales, and property taxes is limited to $10,000 per year for individual filers.
Moving along now, Did you know that you can claim property deductions? That’s right – you’re able to deduct mortgage insurance premiums, home mortgage interest, and real estate taxes paid to the taxing authority during the year.
Felt generous over the past year? Good karma may be coming your way because you can claim charitable contributions. You can deduct charitable cash donations, as well as give away items or property to qualified organizations.
Let’s not forget to claim the contributions to your individual retirement accounts. The total of the contributions to all of your traditional and Roth IRA accounts is $6,000, plus another $1,000 for those over 50 years old. If you have a traditional IRA, your contributions are tax-deductible. Contributions to a Roth IRA aren’t deductible.
Perhaps you had some big-time medical expenses this past year? Well – you may be able to claim medical expenses to help lower your tax bill. In general, you can deduct the amount of qualified, unreimbursed medical expenses that exceed 7.5% of your adjusted gross income for that year. That’s a mouthful, but the point is if you had a large hospital bill or other medical expenses that weren’t covered for you – you may be eligible to claim this deduction.
These are just a few of the many deductions you may be able to claim on your tax return. Remember – you always have the option of taking the “standard deduction.” These (italicized wording below is shown on screen) are the 2021 standard deduction amounts for different types of tax filers. If the total of your claims wouldn’t add up to more than these values – it may be best to go with the standard deduction.
$12,550 for single and married filing separate taxpayers
$18,800 for head of household taxpayers
$25,100 for married filing jointly
And there you have it! Not the most fun subject, but one you may find useful as you prepare your tax return this year.
A brief heads up — this is a sponsored video. MoneyLion and I have partnered with the goal of making important financial lessons easier to understand. My name’s Austin Hankwitz and we’ll see you on the next Beyond the Wallet.
Written disclosure: This video is sponsored by MoneyLion. All content is for informational purposes only.
This material is for informational purposes only and should not be construed as financial, legal, or tax advice. You should consult your own financial, legal, and tax advisors before engaging in any transaction. Information, including hypothetical projections of finances, may not take into account taxes, commissions, or other factors which may significantly affect potential outcomes.