When Opportunity Strikes – Don’t Leave It On the Table

When Opportunity Strikes – Don’t Leave It On the Table

The Vast majority of Americans have received a tremendous benefit because of the increased standard deduction.  As of this writing it has been increased to $12,400 for singles and $24,800 for married folks filing jointly.  However, there may arise an opportunity for you to further reduce your income tax liability by itemizing deductions when you can exceed the above thresholds.  Let’s examine some opportunities.

Itemized Deductions

  • Mortgage Interest: In 2020, you can itemize the interest on a mortgage loan not exceeding $750,000 in principle. However, this only applies to primary residence, second homes or vacation homes.

 

  • Medical Expenses: As of this writing you can write off qualified medical expenses in excess of 10% of your adjusted gross income. For example, if your AGI is $100,000 then your medical expenses over $10,000 for the year can be deducted.

 

  • The 2020 SALT Deduction – Limited to $10,000: The SALT Deduction (which stands for State and Local Taxes) was perhaps the most controversial part of the changes to the individual tax code made by the Tax Cuts and Jobs Act. There are two components of the SALT deduction:
  • Property Taxes – on real estate or any other personal property.
  • State Taxes – Taxpayers can choose to deduct state and local income taxes or their state and local sales taxes.  In most cases the state income tax deduction is more beneficial however this can be a big benefit for taxpayers in states that don’t have an income tax.

 

  • Charitable Donations: The general idea is that charitable contributions are deductible (with some exceptions) up to 60% of the tax payer’s adjusted gross income this is one area that can create a huge opportunity for people who are charitable inclined.

 

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