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“If I claim the standard deduction, am I eligible for any other tax deductions?”

The topics for this week are all about filing your taxes and tax returns. As a reminder, you can go to hylland capital dot com slash ask for archives of previous episodes where we have talked about why your refund may be lower this year, how long to expect it to take to get your refund, and more.

Today’s question is on tax deductions that you are eligible for even if you claim the standard deduction.


The question is:

“If I claim the standard deduction, am I eligible for any other tax deductions?”

 

Transcript - Tax Deductions With the Standard Deduction

Every year, the government gives you a choice. Take a standard tax deduction with no questions asked, or provide the government lots of information in order to try and get a larger tax deduction.

This year saw big changes to the tax code. The standard deduction has now doubled, to $12,000 for a single filer, or $24,000 for a married couple.

For this reason, Intuit, the company behind mint dot com, quickbooks and turbo tax estimates that with this change  nearly 90 percent of Americans will use the standard deduction this year.

And while this change greatly simplifies the tax returns for many Americans, it has also made many previously small tax deductions worthless. The interest that you pay on your mortgage, or small donation to your favorite charity may no longer move the needle on your tax return like it used to.

But, there are a few extra tax deductions that you are eligible for even if you claim the standard deduction, so don’t forget about these tax deductions even if you have a simple tax return.

 

First, the student loan interest deduction. Regardless of whatever deductions you claim, you can always get a deduction for up to $2,500 for interest paid on student loans. You are eligible to claim a portion of  this deduction even if you have very small student loans, or loans with low interest rates. However, for a former student with student loans at a 6% rate, the deduction gets maxed out if your student loan balance is over about $45,000.

 

Next, a Health savings account. If you are part of a high deductible health insurance plan, you may have a health savings account available to you. These accounts, commonly called HSAs are an excellent way to save for retirement and future medical expenses. If you have the option to contribute to an HSA, don’t pass up on the opportunity, and be sure to take the tax deduction for your contribution.

The next tax deduction available to those even if they filed for the standard deduction is a tax deduction for IRA contributions. For the 2018 tax year, if you have access to a 401k or other qualified retirement account, you are only able to deduct the full amount of your IRA contributions if your income is below $101,000 for married couples, or $63,000 if you are single.

Besides those just discussed here, There are others available, especially for small business owners. If you need help knowing what you can do to help reduce your tax bill, reach out and ask us:

Matt Hylland