5 Things You Can Write Off On Your Taxes that You May Not Know
It’s officially tax season. And while you might be dreading it and avoiding it like the plague, it’s something you have to do. While doing your 2019 taxes might not be at the top of your to-do list, there is some good news. You can write off certain things on your taxes to make your situation a bit better. Here are five things you can write off on your 2019 taxes that you might not know about.
1. Student loan interest
Let’s face it, student loan debt can be paralyzing and totally not fun. But in some cases you could write off up to $2,500 in your student loan interest. As you probably know, student loan interest can make it hard to get ahead on your debt repayment. In fact, student loan interest accrues daily.
If your modified adjusted gross income (MAGI) is less than $80,000 you can qualify for this deduction. However, it should be noted that this deduction gets phased out, aka gets reduced based on your income. For example, if your income is between $65,000 to $80,000, the amount you can deduct will be reduced. You will get the form 1098-E from your loan servicer which states how much interest you paid during the tax year. That will help you when doing your taxes.
Did you make any charitable donations to nonprofits or a religious organization? You could write off some of your charitable donations. So not only are you doing some good with your money you could also help your tax situation. The donations must be within the tax year and you will want to have receipts or other records of your donation. There may be some limitations to how much you can deduct, but writing off your donations can definitely help.
3. Business expenses from your side hustle
We are in the Golden Era of the side hustle. It seems like everyone has a side gig to earn that extra cash. We’re here for it but it can also bite into your free time. So that’s why you should know that you can write off your business expenses from your side hustle.
If you have a 9 to 5 and a side hustle, you’re technically considered a sole proprietor. A sole proprietor means that you as an individual acts as the business. So there’s no paperwork or anything, it’s just when you are the foundation of the business. So freelancers, side hustlers, artists and others are considered a sole proprietor.
A sole proprietor is the technical tax designation for your taxes. Since a side hustle can be considered a business, you want to write off your expenses. Drive for Uber? You want to write off your mileage. Need specific materials or equipment for your side hustle? Write it off!
To qualify the expenses must be “ordinary or necessary” expenses. In other words, expenses that help you do your job. Not something lavish that doesn’t really relate to your business and isn’t a “need”.
This is helpful as many side hustles are 1099 income, meaning no taxes are taken out. Having a day job and a side hustle can complicate your tax situation, when no taxes were taken out of your side gig money. That’s why writing off your biz expenses can help you lower your tax liability.
4. Health savings account contributions
Do you save for medical expenses in a health savings account (HSA)? You can deduct your contributions. HSAs can help you save money, especially if you have a high-deductible health insurance policy. This way you have money set aside, but you can also deduct your contributions. If you don’t have an HSA now, it could be something to look into for this tax year.
5. Retirement contributions
Are you saving for retirement? You might be able to deduct your 401(k) or Traditional IRA contributions. You can deduct your contributions that you made to your 401(k). You can also deduct contributions if you’re saving with a Traditional IRA. There may be certain income requirements to qualify for the full tax deduction and can vary by your tax filing status, such as single or married.
Get started with 2019 taxes
As you head into this year’s tax season, you want to make sure you get all the deductions you can! Taxes for 2019 can be done now and you can get ahead and submit before April 15. Just make sure to deduct what you can and if you get a refund, use it wisely.