Tax Deductions...What are the major ones?

Question

This is actually for next years taxes.

I know as I am married, filing jointly, I get the standered deduction of like $10,000. I will get EIC, just a little though (2 kids).

My income this year should be around $100,000.(Thing is is that I have total tax liability, no taxes are going to be taken out before I pay taxes, so I will owe.)

If I buy a house this year and I pay cash for it what deductions can I take? Would it be better to get a mortgage? (Cause I know the interest in the mortgage is a deductible.)

Any other way to make deductions work for me and help bring down my tax liability?

Is there somewhere I can go online to find out what the major tax deductions are? (It's next year's taxes so I can't and don't want to go buy a tax program and find out what all 350+ deductions are.) I just need to know what they are now so as the year goes on I know what to do with my money and pay less taxes next year.

Second dude, you are way right..no EIC next year!

Answer 1

Medical expenses that exceed 7.5% of your adjusted gross income Pub 502
State and Local Income taxes or State and Local sales tax
Real Estate Taxes,Property tax Pub 936
Mortgage Interest Pub 936
Loan Origination Fees Pub 936
Charitable Deductions Pub 526
Misc deductions Pub 529

http://www.irs.gov/publications/p502/ind...

http://www.irs.gov/pub/irs-pdf/p600.pdf....

http://www.irs.gov/publications/p936/ind...

http://www.irs.gov/publications/p526/ind...
http://www.irs.gov/publications/p529/ind...

Answer 2

Unless the $100K is gross income of a business, and you will have over $60K in business expenses to bring the business net down under $40K, you would not be eligible for EIC.

Deductions can only take your income tax to zero. And using this year's figures, if your net income was 38,347, the highest income eligible for any EIC, if your two kids are under 17 and you can take the child tax credit for them, your taxes would already be zero just using the standard deduction: 38,347, minus 10,300 standard deduction is 28,047, minus 4 exemptions (13,200) is 14,847, which would mean a tax of $1483, which would be wiped out by the child tax credits for the kids, so you wouldn't owe anything, so having more deductions wouldn't do anything at all for you. Self employment tax is separate, and would not be helped by having more deductions - that gets added on after your income tax is figured. So if you are really going to be in an income range where you can take EIC, having additional itemized deductions isn't going to help you any at all.

If you aren't expecting to get EIC, and the $100K is the net income from your business, then yes, deductions could help you. You'd probably be in a 25% bracket, so if your total itemized deductions are over 10,300, then each additional $4 of deductions over 10,300 would save you $1 in taxes. The first 10,300 wouldn't save you anything, since you'd get the standard deduction for that much anyway.

The actual numbers will change a bit next year for such things as standard deductions and exemptions, but not enough to change what I've said above.

If you pay cash for a house, you can take real estate taxes as a deduction. You'd get that if you had a mortgage also, but could also take mortgage interest which might make itemizing attractive.

To see what itemized deductions can be taken, go to irs.gov and download 1040 schedule A and its instructions.

Answer 3

Intriguing question from an even more intriguing subject/circumstance.

The suggestion abt reviewing the schedule A of 1040 answers your question. Look also to lines 23 - 36 inclusive on the long form 1040.

Get Publication 17 (every year for you) and learn how to navigate its organizing. It's a challenge, but it's you against your conscience and the IRS; and I suspect you like to confront challenges.

Making $100,000 annually you probably should be considering a Roth and/or a traditional IRA AND investing so that you have capital gains (preferably long term) or losses (preferably short term, if any). Capital gains have (for a few years more) a tax cap of 15%.

I think you'll have a tax penalty from the way you've described your circumstance, unless you pay estimated tax; but most people would probably be happy to trade circumstances with you.

Finally, paying cash for your house? ...or get a mortgage... Rare is it that people pay cash (because few are able.). If you can, it has its advantages (no big monthly payment to housing cost, your continued housing cost is less, and therefore reduced stress) and disadvantages (no mortgage deduction, big bite out of each month's paycheck, less money to invest elsewhere).
You have to weigh them and decide. (The lists are hardly all inclusive, but you're in a rare spot, so give a lot of thought to your decision.)

Answer 4

I prepare taxes for a living, and the most common deductions are mortgage interest, property taxes, state/local income taxes paid/withheld, car registration (personal property tax) and charitable donations. Of these, the most sizeable deduction is going to be mortgage interest.

Buying a house and paying cash isn't going to give you much in the way of deductions. You'll be able to take property taxes paid, that's about it.

Answer 5

How do you figure you will get the EIC if you make 100,000 dollars this year? That's not correct.

Look at Schedule A of the 1040, and there's your list of deductions.