Tax deductions can save a taxpayer thousands of dollars a year, but saving money isn’t always as easy when you rent an apartment and can’t take off deductions for owning a home. A homeowner can deduct the amount of money he or she pays in mortgage interest off the yearly taxes, but a renter in an apartment community doesn’t have that luxury.
Fortunately, there are some options for reducing your tax bill even if you’re renting an apartment and you don’t own any property. Here are a few things to consider as tax season ramps up this year.
Tax Changes Occur Every Year
Although the current presidential administration recently pushed through a major tax change, it doesn’t take a huge tax overhaul to see changes in the tax code. Small changes here and there happen just about every year, and you never know when a tax deduction will appear in the tax code that you can take advantage of like an apartment dweller.
Some of the tax changes that Intuit suggests you may need to be aware of include:
- Changes to the standard deduction that increase rates to $6,350 for single filers, $9,350 for head-of-household filers, and $12,700 for married-filing-jointly.
- An increase in the estate and gift tax to a total of $5.49 million for a single filer and double that amount for married couples.
- An increase to 10% for unreimbursed medical expenses from the previous amount of 7.5 percent of Adjusted Gross Income (AGI)
Remaining conscious of these tax changes can help make sure you take the maximum deductions possible on your tax forms this year.
The Home Office Deduction and a Simplified Calculation
One of the most popular deductions that people take is the home office deduction, and it’s actually available to homeowners, as well as apartment dwellers. The IRS requires that you use the part of your home that you claim for the deduction exclusively for work, but that space doesn’t have to be separated completely from the rest of the home.
For example, even if you only live in an apartment with a single bedroom, you can still take off a section of your living room, dining room, or an area that’s blocked off with a temporary divider. You’ll need to figure out the percentage of your home used for business and the total square footage of your residence. If the math seems scary, you can use the simplified method for home office deductions from the IRS.
“The simplified method, as announced in Revenue Procedure 2013-13, is an easier way than the method provided in the Internal Revenue Code (the “standard method”) to determine the amount of expenses you can deduct for a qualified business use of a home.”
While you can rely on the expertise of a tax professional to figure out your home office deduction, it’s also possible to follow the (lengthy) directions on filling out the required paperwork. A tax professional may also be able to point out tax deductions you haven’t realized you can take off with this year’s 1040 form.
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