We Added A Little Pepper to This SALT Deductions Overview
Income tax time is the time of the year when everyone scrambles to file their tax return. All taxpayers in every bracket went to obtain deductions and credits if it's at all possible. We're pleased to tell you that it is possible for you.
There is something called the SALT deductions. About 30 percent of taxpayers find these deductions useful even now since the president made a few changes to them. Here's some information about SALT deductions for your review. Go through it and use it to your benefit if you're someone who could fare well by doing so.
What Are the SALT Deductions?
The acronym stands for State and Local Tax deductions. The SALT deductions first came into existence in 1913.
Many administrators have made changes to those deductions over the years, but they are still intact. However, some government changes might make the SALT deductions less beneficial to some taxpayers. It all depends on each person's individual situation.
What's Included in SALT Deductions?
You can claim a variety of items in your SALT deductions on the Schedule A form. They include the following items:
Real Estate Property Taxes:
You may be able to claim any taxes that you paid on the home you own for the previous year. As long as you did not use the home as a business establishment, you will most likely be eligible to claim this in your SALT deductions.
Personal Property Taxes:
You can claim any annual taxes that you paid on personal items such as cars and motorcycles.
State Income Taxes:
If you paid any taxes state taxes through your job during the year, you might be eligible to claim them. You can find the information on how much state income taxes you paid by reviewing your W-2 or your 1099-MISC if you're a contractor.
Local Income Taxes:
You may also claim any local income taxes that you paid during the year. The information has its own line on your W-2 for the 1099-MISC form.
State and Local Income Taxes From a Previous Year:
You have the right to claim any state or local income taxes that you paid during a previous year and did not yet claim. They are allowable so long as they are not interest or penalty payments for the current year.
Mandatory Contributions:
If you live in certain states, you might be able to claim any contributions you made to a mandatory program. Programs that qualify for SALT deductions may include disability programs, unemployment compensation, workers' compensation, and leave funds. Be advised that this only applies in certain states in the United States. You must do your due diligence to find out if you can qualify for this in your state. If so, it's just another thing you can add to your list of deductions.
State and Local Sales Taxes:
You can add up all the sales taxes you've paid over the year on food, clothing, automobiles, goods, and the like. The catch is that you have to save all of your receipts and add them up to come up with the figure. This might take a while as you have to count all of the sales taxes you paid on all of your receipts. It may be a benefit to you if you're a huge shopper, however.
State and Local Estimated Tax Payments:
You can claim any state and local estimated tax payments that you made during the year. You can also claim a partial or full refund that you may have chosen to credit to your taxes.
A State Refund Offest:
You're allowed to claim a state or local tax refund offset when you file your taxes. You'll have to complete a Schedule 1 to get the appropriate figure, but you're entitled to do so.
As you can see, there are many SALT deductions you could take. Using them can make a huge difference for you if you qualify as one of those who would benefit from taking them.
Who Benefits From the SALT Deductions?
You might benefit from the SALT deductions if your itemized deductions are going to add up to more than the standard deduction for your filing status. In previous years, that was easy to do because the standard deductions were not very high. Since then, the standard deductions have been raised quite a bit.
know your taxes. visit the taxry store.
You would have to have enough itemized deductions aside from the SALT deductions to make it worth your while to use the SALT deductions. Some recent changes to the SALT deductions have made it a little bit more difficult to outdo the standard deduction with SALT as the only deductions.
What Are the Benefits of the SALT Deductions?
The benefit of using the SALT deductions is the same as the benefit you would get from using any other deduction. The deduction reduces the amount of taxes you have to pay in the end. Just about every taxpayer aims to owe fewer taxes.
Thus, the SALT deductions might be a blessing to you if you can meet the requirements to use it. You can speak to a tax specialist who can help you figure out your itemized deductions to see if the SALT can benefit you.
What Are the Limits on the SALT Deductions?
Now, let's talk about the limitations that the government has put on the SALT deductions lately. Two major changes happened to the SALT deductions over the past few years that might seem less beneficial. First, the government put a cap on the amount a taxpayer can deduct. Married persons filing a joint return, head of household filers, and single persons can deduct no more than $10,000 in SALT deductions. Filers who are married filing separately are limited to only deducting $5,000 in SALT deductions. That makes a huge difference in the benefit that one can get from claiming this deduction. For you to benefit, you would also have to be eligible to take at least $2,400 of other itemized deductions if you're single.
Another change the government made to SALT deductions was that a taxpayer could no longer claim both state sales taxes and property taxes. They must choose one or the other. These new regulations may put a damper on a homeowner's tax return, or it may affect someone who itemizes his or her taxes but doesn't have enough of the other deductions to make it count.
That's basically all there is to know about the SALT deductions. We'll take this a step further and provide you with some other itemized deductions that can help you pass the standard deduction if you add them to the SALT:
Student Loan Interest
We have good news for you if you're currently going to college. You can claim the interest payments you make on your student loans in your itemized deductions. The current cap on such interest payments is $2,500.
Gambling Losses
You're allowed to add any gambling losses that you had to your itemized deductions. Examples of games that apply are horse races, casino games, sports betting, raffles, and lotteries. There are two stipulations to this, however. You have to keep a complete record of your winnings as well as your losses, and you have to subtract your losses from your winnings. If you come with greater losses than you have winnings, you can add them to your itemized deductions.
Mortgage Interest
Good news if you own a home. You can add the interest on the mortgage you pay for your home to your list of itemized deductions. The cap is $750,000. Therefore, it will be helpful to you as long as you don't own a costly home.
Charitable Contributions
If you give to 501(c)(3) public charities, you can claim all the charitable contributions you made over the course of the year. For 2020, you can claim up to 100 percent of your adjusted gross income for your donations. There are a few things to remember about this, however. First, you have to make sure that the entities you contributed to are 501(c)(3) public charities. Secondly, you have to save all of your receipts just in case the IRS decides to conduct an audit on your return. Thirdly, you will qualify for the deduction even if what you donated was not cash. However, you will have to get the item appraised if you donate property. You'll need to keep the appraisal documents on you at all times in case of an audit.
Medical Expenses
You can claim your medical expenses if you've had a lot of them over the course of the year. You can claim any qualifying expenses that were over 7.5 percent of your adjusted gross income. In other words, you can claim any amount over $3,750 if your adjusted gross income for the year is $50,000. That means you would get to claim $2,000 if your medical bills were $5,750 for that year. You will be able to calculate the amount you can deduct on your Schedule A form.
The good news is that this deduction covers a lot of medical expenses. It includes fees for a wide variety of medical professionals such as doctors, chiropractors, surgeons, dentists, and other practitioners. It covers inpatient hospital care as well as nursing home care. You can also deduct weight-loss program expenses if you're trying to lose weight because of a disease. The list of items that are converted is extensive. You should have no problem getting a good bit of your medical expenses on the deduction list.
Investment Interest
You can claim investment interest if you borrowed money to buy into a taxable investment. For example, if you borrowed a margin loan to buy stock for your brokerage account, you can claim the interest you paid on it. You can calculate your expenses on form 4952. You will then put your expenses on Schedule A under the "expenses you paid." It can help you to reduce the amount of taxes you'll owe.
Classroom Supplies
If you are a teacher, you might be able to claim up to $250 for the books and supplies you had to buy for your students. You can deduct up to $500 if you are currently married to another eligible teacher or educator. People who qualify as eligible educators include teachers, principals, counselors, aides, and instructors. The list of supplies that qualify for this deduction is extensive. It includes items such as classroom books and instructional supplies such as pens, paper, and pencils. Other items that qualify are items such as computer equipment and software. Any supplementary supplies that teachers use in the classroom will also be eligible for the deduction.
Those are just a few of the deductions you can still take if you want to itemize your deductions and use them with the SALT deductions for your benefit.
Contact Us for More Information
Now you know all about the SALT deductions and where you stand the next time it comes time to file your income taxes. You can contact us if you have any additional questions about taxes. We have a variety of resources about taxes, and we also have a connection to respectable tax specialists who can answer all of your questions, as well. That's not the only connection we have, however.
We take pride in the fact that we help consumers obtain the loan products that they need. We are not a lender, but our trusty agents can help you get in touch with a lender who can supply you with the funds you need and want. Additionally, we have a wealth of articles, blogs, and pages for just about any personal finance topic you can think of.
All you have to do to start taking charge of your finances is to contact us. You can easily do that by making a brief phone call or reaching out to us via short form. We're here to make sure that you stay on top of your finances. We won't let you down.