The new Tax Cuts and Jobs Act had made some changes on the standard deduction by nearly doubling it from $6,350 in previous years to $12,200 for the taxes will be filed in 2020. The data show us that around 60% of the American taxpayers were taking the standard deduction and this number is expected to go as high as 90% in the future tax years.
The biggest problem with this is however, many people think once they take the standard deduction, doors for other deduction closes for them. This is the biggest misconception that the taxpayers have for the most part. There are deductions you can claim if you are eligible whether you take the standard deduction or itemize. These deductions are called above-the-line deductions and a few of them might apply you so you can reduce your taxable income even more with the doubled standard deduction!
You can see the most popular above-the-line deductions that many American taxpayers can benefit from.
If you are saving up some money on your health savings account, it’s a wise move. Because these contributions can be tax deductible, reducing your taxable income. The best thing about this is that it’s very beneficial to the person whoever contributes and gets the financial benefit of the dollars without paying taxes on them. The phase-out limit for this is $7,000 for family coverage and $3,500 for single filers but if you are older than 55, you get to keep an extra $1,000 off of your taxable income with the HSA contributions.
Student Loan Interests
There is a high chance that you are already paying for student loans as the student debt is of Americans are around $1.4 trillion and on average they pay around $20,000 to $40,000 each and it’s probably with an interest rate. If you’re legally obligated to pay interest on a student loan, you can deduct as much as $2,500 of the interests you pay as an above-the-line deduction. This deduction is only available if nobody claims you as a dependent.
If you are a qualified teacher such as an educator from kindergarten through grade 12, counselor, instructor, or aides, you can deduct as much as $250 off of your taxable income if you paid for any necessary classroom expenses or any educational supplies out of your own pocket during the tax year. Also, if your spouse is a qualifying teacher as well, you both can claim this deduction, totaling at $500 on a joint return.