If you want to save money on your taxes this year, there are many ways to do so. But the tax code is so complex that it can be hard to know where to begin. International US tax advice in Singapore, Portugal, UAE is the perfect solution for all your tax needs.
That’s where tax deductions and credits come in. When you take a deduction, it shrinks your taxable income, thereby reducing the amount of tax you have to pay.
1. Real Estate Depreciation
Real estate depreciation is one of the most beneficial tax deductions for landlords. By deducting a portion of the building’s value against income over a designated useful life, the IRS allows investors to dramatically reduce their taxable income.
The IRS deems residential rental properties to be depreciated over 27.5 years and commercial property to be depreciated over 39 years. Investors can choose the appropriate depreciation method for their specific situation.
Real estate investors who want to maximize their depreciation benefits can do a cost segregation study. This involves breaking down the property into different components, such as the land and the building, and then re-classifying them into their proper depreciation recovery periods.
2. Business Interest Expenses
Running your business isn’t cheap, and securing financing for your operations can be a costly process. But there’s a good news: You can deduct interest on certain types of business loans!
But before you start writing off your business loans, it’s important to know what is and isn’t tax deductible. And, if you’re a larger business, there may be limits to the amount of deductions that you can claim.
Under the TCJA, businesses are limited to a deduction for business interest expense that isn’t more than 30% of adjusted taxable income (ATI). This limitation is more likely to hit companies that have low-performing years or poor cash flow.
3. Medical Expenses
Medical expenses can take a major chunk out of your budget, but you can deduct some of them on your tax return to reduce your overall tax bill. However, you must make sure your medical costs meet specific qualifications before you can claim this deduction.
The IRS defines medical expenses as any costs associated with the diagnosis, treatment or prevention of disease or injury. These include health insurance premiums, doctor and hospital visits, prescription medications, glasses, contacts and eyeglass repair or replacement, as well as nursing help and other related services.
Most people can claim a medical expense deduction on Schedule A of their federal income tax returns. However, the amount of qualified expenses that you can deduct depends on your adjusted gross income (AGI).
4. Home Office Deduction
The home office deduction is a valuable tax break for self-employed individuals. But it is important to understand the rules and be sure you’re compiling your expenses correctly.
The IRS defines a home office as any space in your residence that is regularly and exclusively used for a business. If you meet all of the requirements, you can claim the home office deduction.
However, many people are concerned that claiming a home office deduction increases their audit risk. That’s not true if you keep good records.
5. Business Credits
Tax deductions are a great way to reduce your taxable income. However, they are not the only type of tax savings you can claim.
There are also many types of business credits that can save you money on your taxes. Some of these credit programs are specific to your state, while others can benefit you regardless of where you are located.
Research and development (R&D) is another important business credit that can be used by businesses with an innovative product or process. The amount of your credit depends on the type of research and can be a significant portion of your total expenditures.
Education expenses can also be deductible, as long as the costs are related to the improvement of business skills and expertise. This can include attending classes, workshops or other educational opportunities that are specifically relevant to your business.