MEDICAL AND DENTAL EXPENSES

If you itemize your deductions for a taxable year on Schedule A (Form 1040), Itemized
Deductions, you may be able to deduct expenses you paid that year for medical and
dental care for yourself, your spouse, and your dependents. You may deduct only the
amount of your total medical expenses that exceed 7.5% of your adjusted gross
income. You figure the amount you're allowed to deduct on Schedule A (Form 1040).

Medical care expenses include payments for the diagnosis, cure, mitigation, treatment,
or prevention of disease, or payments for treatments affecting any structure or function
of the body.
Deductible medical expenses may include but aren't limited to the following:
● Payments of fees to doctors, dentists, surgeons, chiropractors, psychiatrists,
psychologists, and nontraditional medical practitioners.
● Payments for inpatient hospital care or residential nursing home care, if the
availability of medical care is the principal reason for being in the nursing home,
including the cost of meals and lodging charged by the hospital or nursing home.
If the availability of medical care isn't the principal reason for residence in the
nursing home, the deduction is limited to that part of the cost that's for medical
care.
● Payments for acupuncture treatments or inpatient treatment at a center for
alcohol or drug addiction; or for participation in a smoking-cessation program and
for drugs to alleviate nicotine withdrawal that require a prescription.
● Payments to participate in a weight-loss program for a specific disease or
diseases diagnosed by a physician, including obesity, but not ordinarily payments
for diet food items or the payment of health club dues.
● Payments for insulin and for drugs that require a prescription for its use by an
individual.
● Payments made for admission and transportation to a medical conference
relating to a chronic illness of you, your spouse, or your dependent (if the costs
are primarily for and essential to necessary medical care). However, you may not
deduct the costs for meals and lodging while attending the medical conference.
● Payments for false teeth, reading or prescription eyeglasses, contact lenses,
hearing aids, crutches, wheelchairs, and for a guide dog or other service animal
to assist a visually impaired or hearing disabled person, or a person with other
physical disabilities.
● Payments for transportation primarily for and essential to medical care that
qualify as medical expenses, such as payments of the actual fare for a taxi, bus,
train, ambulance, or for transportation by personal car; the amount of your actual
out-of-pocket expenses such as for gas and oil; or the amount of the standard
mileage rate for medical expenses, plus the cost of tolls and parking.
● Payments for insurance premiums you paid for policies that cover medical care
or for a qualified long-term care insurance policy covering qualified long-term
care services. However, if you're an employee, don't include in medical expenses
 the portion of your premiums treated as paid by your employer. Employer-
sponsored premiums paid under a premium conversion plan, cafeteria plan, or
any other medical and dental expenses paid by the plan aren't deductible unless
the premiums are included in box 1 of your Form W-2, Wage and Tax Statement.
For example, if you're a federal employee participating in the premium
conversion plan of the Federal Employee Health Benefits (FEHB) program, you
may not include the premiums paid for the policy as a medical expense.

SELF-EMPLOYED HEALTH CARE DEDUCTIONS

If you're self-employed and have a net profit for the year, you may be eligible for the
self-employed health insurance deduction. This is an adjustment to income, rather than
an itemized deduction, for premiums you paid on a health insurance policy covering
medical care, including a qualified long-term care insurance policy for yourself, your
spouse, and dependents. The policy can also cover your child who is under the age of
27 at the end of 2021 even if the child wasn't your dependent.

Eligibility is determined month-by-month

You can only claim the health insurance premiums write-off for months when neither
you nor your spouse were eligible to participate in an employer-subsidized health plan.

For example, if you were single and ineligible for any employer-provided health plan
during the last six months of the year because you left your job and started your own
business, you can claim the deduction for premiums you paid for coverage during that
six-month period.

Earned income limitation

The deduction cannot exceed the earned income you collect from your business.

For example, if your self-employment activity is a sole proprietorship that generated a

tax loss for the year, you’re not allowed to claim the deduction because the business
didn't generate any positive earned income.

You may not deduct funeral or burial expenses, nonprescription medicines, toothpaste,
toiletries, cosmetics, a trip or program for the general improvement of your health, or
most cosmetic surgery. You may not deduct amounts paid for nicotine gum and nicotine
patches that don't require a prescription.
You can only include the medical expenses you paid during the year. You must reduce
your total deductible medical expenses for the year by any reimbursement of deductible
medical expenses, and by expenses used when figuring other credits or deductions.
This is true whether you receive the reimbursement directly or it's paid on your behalf to
the doctor, hospital, or other medical provider.

EDUCATOR EXPENSES
If you're an eligible educator, you can deduct up to $250 ($500 if married filing jointly and
both spouses are eligible educators, but not more than $250 each) of unreimbursed trade or
business expenses. Qualified expenses are amounts you paid or incurred for participation in
professional development courses, books, supplies, computer equipment (including related
software and services), other equipment, and supplementary materials that you use in the
classroom. For courses in health or physical education, the expenses for supplies must be for
athletic supplies. Qualified expenses also include the amounts for personal protective
equipment, disinfectant, and other supplies used for the prevention of the spread of
coronavirus. This deduction is for expenses paid or incurred during the tax year. You claim the
deduction on Form 1040, Form 1040-SR, or Form 1040-NR (attach Schedule 1 (Form 1040)
PDF).

You're an eligible educator if, for the tax year you're a kindergarten through grade 12 teacher,
instructor, counselor, principal or aide for at least 900 hours a school year in a school that
provides elementary or secondary education as determined under state law.

Tax Deductions for Homeowners

Owning a home can give you hefty tax write-offs each year. Here's a summary:

● Mortgage Interest. If you bought your home before Dec. 15, 2017, you can deduct
mortgage interest payments on up to $1 million in loans used to buy, build, or improve
your first or second home. If you purchased the home after Dec. 15, 2017, you can
 deduct mortgage interest on the first $750,000 of the loan. The $1 million limit is
scheduled to return in 2025.
● Private Mortgage Insurance. If you borrow more than 80% of the home's purchase
price, your lender may require private mortgage insurance, or PMI. You can deduct PMI
premiums for mortgages taken out after 2006. However, the amount of the deduction
depends on your income: The deduction starts to phase out if your income is over
$100,000 per year (or $50,000 for married couples filing separately). There's no
deduction if you earn more than $109,000 per year (or $54,500 if married filing
separately).
● Points. Lenders may charge points in exchange for a better interest rate. One point is
equal to 1% of the total amount you mortgage. You can deduct points associated with a
home purchase mortgage. In general, you can't deduct the full amount of points the year
you pay them. Instead, you typically deduct them over the life of the loan.
● Property Taxes. One of the most significant changes the TCJA brought was to limit
deductions for property taxes and other state and local taxes ("SALT"). For tax years
2018 through 2025, you can take a combined total deduction of $10,000 ($5,000 for
married couples filing separately) for state and local income, sales, and property taxes.
● Home Office Deduction. If you use part of your home exclusively for business purposes
—and your home is the principal place of your business—you may be able to deduct a
percentage of home costs related to your work.
● Selling Costs. If you sell your home, you can lower your taxable capital gain by the
amount of your selling costs—including real estate agent commissions, title insurance,
legal fees, advertising costs, administrative costs, escrow fees, and inspection fees.
Keep in mind that if you sell your home for a profit, you can exclude up to $250,000 of
capital gains from your income, or up to $500,000 if you're married filing jointly.

The mortgage credit certificate (MCC) allows low-income, first-time homebuyers

to benefit from a mortgage interest tax credit of up to 20% of the mortgage
interest payments—up to $2,000 per year. To take the credit, you must first apply
for a certificate through your state or local government.

Tax Deductions for Charitable Donations

You donated your skinny jeans and wagon-wheel coffee table to Goodwill, which, in turn,
reduces your taxes by increasing your charitable deductions. The IRS requires that you provide
“a qualified appraisal of the item or group of items” if you claim a deduction of more than $5,000
per item (or a group of similar items. For items such as electronics, appliances, and furniture,
you may need to pay a professional to assess the value of your donation.

For the 2021 tax year, you can deduct up to $300 ($600 if you're married filing jointly) in cash
donations made to qualifying charities, even if you take the standard donation. This is called an
above-the-line deduction.
If you itemize, you can usually write off up to 20% to 60% of your adjusted gross income (AGI)
for charitable contributions—the amount varies depending on the type of contribution and the
type of charity. For 2021, however, you can deduct up to 100% of your AGI for cash
contributions to qualifying charitable organizations.

BUSINESS USE OF YOUR HOME

Business use of your home. You may be able to deduct certain expenses for business use of
your home, subject to limitations. To claim a deduction for business use of your home, you
can use Form 8829 or you can elect to determine the amount of the deduction using a
simplified method.

Principal Place of Business

In determining whether the office in your home qualifies as your principal place of business, you
must consider the following two items.
● The relative importance of the activities performed at each place where you conduct
business.
 ● The amount of time spent at each place where you conduct business.

Your home office will qualify as your principal place of business if you meet the following
requirements.
● You use it exclusively and regularly for administrative or management activities of your
trade or business.
● You have no other fixed location where you conduct substantial administrative or
management activities of your trade or business.

Administrative or management activities. There are many activities that are administrative or
managerial in nature. The following are a few examples.
● Billing customers, clients, or patients.
● Keeping books and records.
● Ordering supplies.
● Setting up appointments.
● Forwarding orders or writing reports.

How Do You Calculate Your Deduction?

Regular Method
Taxpayers using the regular method (required for tax years 2012 and prior), instead of the
optional method, must determine the actual expenses of their home office. These expenses
may include mortgage interest, insurance, utilities, repairs, and depreciation.

Generally, when using the regular method, deductions for a home office are based on the
percentage of your home devoted to business use. So, if you use a whole room or part of a
room for conducting your business, you need to figure out the percentage of your home devoted
to your business activities.

Simplified method.
The simplified method is an alternative to the calculation, allocation, and substantiation of actual
expenses. In most cases, you will figure your deduction by multiplying the area (measured in
square feet) used regularly and exclusively for business, regularly for daycare, or regularly for
storage of inventory or product samples, by $5. The area you use to figure your deduction
cannot exceed 300 square feet. You cannot use the simplified method to figure a deduction for
rental use of your home.

You are limited to a maximum of 300 square feet for all of the businesses you conduct in your
home that qualify for this deduction. Allocate the actual square footage used (up to the
maximum 300 square feet) among your qualified business uses in any reasonable manner you
choose, but you may not allocate more square feet to a qualified business use than you actually
use in that business.
Mileage Deductions
If you use your vehicle for business or certain other activities, like traveling for medical treatment
or charitable work, you may be able to deduct your costs for tax purposes. But the Internal
Revenue Service (IRS) rules for doing so are strict. Many changed when the Tax Cuts and Jobs
Act (TCJA) went into effect in 2018.

Learn the IRS rules for deducting your mileage on your tax return, including how to choose a
mileage method, what records you need, and how to claim the deduction at tax time.

What Is the Mileage Rate for 2021?

Standard Mileage Deduction Rates

 2021 (tax return due in 2022 (tax return due in
Purpose 2022) 2023)

Business mileage 56 cents per mile 58.5 cents per mile

Medical and moving 16 cents per mile 18 cents per mile

mileage

Charitable mileage 14 cents per mile 14 cents per mile

The chart above shows the standard IRS mileage rates for tax years 2021 and 2022.

The standard mileage rate is the amount you can deduct based on miles driven, rather than
your actual vehicle expenses.

Businesses often use these rates to reimburse employees for using their personal vehicles for
job-related travel. If you’re self-employed, you can use them to determine your own deduction.

How to Calculate Mileage for Taxes

There are two ways to calculate your mileage for your tax return: using the standard mileage
rate or calculating your actual costs.

Standard Mileage
The standard mileage rate is a simplified way of deducting your mileage. It is based on the
number of miles driven instead of your actual costs. You keep track of your miles driven for IRS-
approved purposes (business, medical activity, moving, or charitable work). Then, you multiply
them by the correct mileage rate.

For example, if you drove your vehicle 1,000 miles for IRS-approved business purposes in
2021, multiply 1,000 miles x $0.56 per mile. You’ll be able to deduct $560.

To use the standard mileage rate for a car you own, you need to choose this method for the first
year you use the car for business. You can then choose between deductions based on the
standard mileage rate or actual costs in subsequent years. If you choose the standard mileage
rate for a vehicle you’re leasing, you’ll need to stick with that method for the entire lease.
If you choose this method, you’ll need to log your miles to calculate your deduction at the end of
the year. Keep a written mileage log in your vehicle, or download a mileage app to keep track.

Actual Costs
You can choose to deduct the actual costs of using your vehicle instead of deducting your
mileage. If you’re using a vehicle for both business and personal reasons, you can deduct only
the costs for business use. You can include the following expenses:
Gas
Oil, tires, and repairs
Insurance
License and registration fees
Depreciation of the vehicle or lease payments due to the percentage of miles you drive it for
business purposes
You’ll need to keep records, such as receipts, to document your vehicle expenses. This will
allow you to support your deduction in case you're audited. You should keep old tax records for
at least three years after you’ve filed your return.
If you qualify for both mileage methods, try calculating both to see which results in a bigger
deduction.

Who Can Deduct Mileage for Business?

You can’t claim business mileage deductions for your commuting expenses between your home
and your regular place of work. Your employer may reimburse you for some job-related travel,
such as if you drive from your primary work location to meet with clients.

However, you aren’t allowed to deduct mileage that your employer doesn’t reimburse you for.
Under the TCJA (Tax Cuts and Jobs Act) rules, the itemized deduction for unreimbursed
employee expenses was suspended from 2018 to 2025. The only exceptions are for:
Military reservists
State and local employees paid on a fee basis
People who have job expenses related to an impairment
Some performing artists

The rules are different if you’re self-employed, though. You still can’t deduct your mileage if you
commute from your home to your primary business. But if you’re traveling from your business to
meet with clients or visit a project site, you can deduct your mileage. This applies even if your
business is based out of your home.
The tax rules for ride-share drivers are similar. Ride-share drivers can deduct mileage according
to the standard IRS rate or their actual costs.

Who Can Deduct Mileage for Moving?

You can deduct your mileage when moving only if you’re active-duty military and you’ve been
ordered to a permanent change of station. Otherwise, this mileage deduction isn’t allowed. The
TCJA suspended the deduction of moving expenses for all nonmilitary taxpayers from 2018 until
2025.

Who Can Deduct Mileage for Medical Reasons?

You can take a medical tax expense deduction only if your overall unreimbursed medical costs
exceed 7.5% of your adjusted gross income (AGI). You can deduct your mileage at the standard
rate of 18 cents per mile for 2022 and 16 cents per mile for 2021, or you can deduct your actual
costs of gas and oil. Deducting parking costs and tolls is also allowed.
You’re allowed to deduct mileage for your own treatment. You can also claim this deduction if
you’re transporting a child to receive treatment or visiting a mentally ill dependent as part of a
recommended treatment.

Who Can Deduct Mileage for Charitable Reasons?

If you travel to perform volunteer work, you can deduct the standard amount for the year.
Alternatively, you can deduct your costs of oil and gas but not other vehicle expenses like
depreciation, maintenance, insurance, and fees.
You can also deduct your costs for parking and tolls while volunteering no matter which
deduction method you choose.

1/5

10 Common Small Business Tax Deductions

thebalancesmb.com/small-business-tax-deductions-397640

Most small business expenses qualify as tax deductions, You can cut your business tax bill by
taking as many qualified deductions as possible. This article discusses 10 of the most
common deductions and how they work.

Key Takeaways
● Your small business can deduct most common expenses, as long as they are ordinary
● and necessary for your type of business.
 ● For some expenses you must separate personal use from business use, because
personal use isn't deductible.
You can't prepay for these expenses; they must be able to be used during the year.
Some business expenses that can't be deducted in one year can be spread out over
several years through depreciation.

How Do Business Tax Deductions Work?

Small businesses can take tax deductions for all ordinary and necessary expenses for
operating the business for a profit. But different kinds of expenses are deducted differently.

The types of business expenses are:

● Capital expenses for long-term assets like a company car, equipment, startup costs, and
● improvements
● Cost of goods sold, the expenses for making, selling, and shipping products
● And all the normal costs of running a business, like the cost of leasing, paying
employees and non-employees, office expenses, utilities, and supplies
● In this article, we'll look at some common expenses you can deduct to cut your tax bill.
● Personal expenses aren't deductible., so you must separate business expenses from
personal expenses. For example, you can't deduct expenses for commuting between
your home and your business, because this is considered to be personal driving.

10 Tax Deductions for Small Businesses

Legal and Accounting Fees and Tax Preparation
You may decide to hire and pay an attorney for legal services or someone to take care of your
bookkeeping and accounting, or to prepare tax returns and offer tax advice. These
professional services are deductible business expenses.

You can't deduct legal or accounting fees for services in helping with business startup or to
acquire business assets, but you can include them in the cost of your business or the asset. If
an accountant or attorney is doing your tax return or other work that includes both business
and personal services, you can't deduct the personal part of the fee.
Advertising and Marketing Expenses
Whether you call it advertising, marketing or promotion, you can deduct expenses that help
you bring in new customers and keep existing clientele. You can also deduct costs for keeping
your name before the public, like advertising that encourages people to contribute to
Nonprofits.

One of the biggest deduction mistakes business owners make, though, is trying to deduct the
costs of driving around with an ad for your business on your car. The cost for the ad itself is
deductible, but not the cost of driving the car around with the ad on it.

Computers, Tablets, and Cell Phones

You can deduct the costs of purchasing necessary reference materials as well as computer
hardware and software. It's no longer necessary to depreciate these items as long the cost
isn't more than $2,500.

Only the business use of your computer or iPad is deductible. Computers, tablets, and related
hardware and software are not considered listed property as of the 2018 tax year, but you still
should be using these devices for business purposes more than 50% of the time.

Use of a Car or Truck for Business Purposes

You can deduct expenses related to business use of your vehicle using the IRS standard
mileage rate or by deducting actual expenses.

The standard mileage rate changes each year, so check the rate for the current tax year. Run
the numbers both ways (standard vs actual mileage) to see which is best for your business.
Keep in mind that there are some restrictions; for example, you can't use the standard
mileage rate if you depreciated the cost of your vehicle in previous years.

You can't deduct expenses for commuting to your business location or for personal driving,
so you must separate out the personal driving mileage from business miles before calculating
the deduction.

Insurance Expenses
If you have purchased insurance for your business, for your business equipment, or group
health insurance for yourself and employees, you can deduct premium costs. Other types of
insurance premiums you can deduct include:

Workers' compensation insurance under state laws

Insurance to cover business expenses if a business owner is disabled
Life insurance for officers and employees, if the business isn't a beneficiary
Business interruption insurance if your business is shut down for fire or other causes.

Interest on Business Debts

If you have bought a building for your business or you have a business loan, you probably
have interest expenses. Small businesses with annual average gross receipts of $25 million or
less for the past three years can take all interest expense deductions with no limit.

Leasing an Office, Equipment, or Business Vehicle

Lease expenses for office space or for equipment is deductible each year, but only for the
expense for that year. That means you can't prepay a lease for an additional year and take the
deduction for that second year on your tax return for the current year.

You can also deduct the cost of leased vehicle for your business, depending on the type of
lease. If the lease is an operating lease for under 12 months, the cost can be deducted each
year for the term of the lease. The other type of lease, called a capital lease, is a longer-term
lease that has similar terms to a purchase. Capital leases must be depreciated.

Most business vehicles are considered listed property, meaning that you must separate out
business use from personal use, and you can only deduct the part of the lease cost related to
business use.

Employee Expenses
Having employees means you can take deductions for most expenses relating to these
workers. You can deduct employee-related costs for:
Wages and salaries
Uniforms
Tools and equipment
You can deduct costs for employment taxes including workers compensation, unemployment
tax, and FICA tax for the employer part of Social Security and Medicare taxes.
Employee benefit costs are deducted in two different places on your business tax return.
You'll need to separate for pension and profit-sharing plans from costs for other benefit
programs before you enter them on your return.

Business Travel and Meal Expenses

Expenses for business travel are deductible if they involve travel away from your main place
of business or work. Deductible travel also must be primarily for business purposes. You can
deduct costs for transportation, lodging, taxis or ride-sharing, and miscellaneous expenses
like laundry services and tips.

Entertainment expenses are no longer deductible, but you can deduct meal expenses. Most
meals can only be deducted up to 50%, and you must prove these for business purposes.
Meals while traveling are still deductible at the 50% rate.

The IRS has made a temporary exception to the 50% limit on meals and beverages from
restaurants and other businesses that prepare and sell food and beverages, in the facility or
for takeout. From January 1, 2021, through December 31, 2022, you can deduct the costs of
restaurant meal costs at 100%.

Office Supplies and Office Expenses

Every business needs office supplies and materials such as staplers, paperclips, pens, pencils,
etc. These expenses are also deductible for business tax purposes as long as they are used
during the year. Be careful to separate out supplies used in making and shipping products
and include these in cost of goods sold.

Other expenses for running an office, like internet hosting fees, are deductible. Office
equipment like desktop computers and office phones can also be deducted n the year you buy
them if they cost less than $2,500.

If you buy office equipment that is useful beyond one year, like professional instruments,
books, or equipment, these must be depreciated over multiple years.

The Bottom Line

Most business deductions come with limits, restrictions, and qualifications. Get help from a
licensed tax professional when you're ready to do your yearly taxes. You may also be able to
use business tax preparation software if you have a relatively simple tax return.

Create a paper or electronic trail for each deduction you claim. Include the date of the
expense, the exact amount, and the purpose it served your business in case you have to
explain the deduction to the IRS. This can be as easy as saving receipts, bank statements, and
credit card statements and making notations on them to remind yourself why the expenses
were incurred.

Student loan interest deduction

March 22, 2021 : H&R Block
With the high cost of college, many students look to student loans to finance their college
experience.

While the cost of college can add up, there is a potential tax deduction you can take. The
student loan interest tax deduction can help make college costs more affordable.

While you may be on your way to college, in college, or out, this post will discuss the student
loan interest deduction. So, if you will someday or are currently paying back loans you took to
finance your higher education, tune in!

Is student loan interest deductible?

If you’re wondering, “is student loan interest deductible?” The answer is yes. In fact, you could
qualify to deduct up to $2,500 of student loan interest per return per year. You can claim the
student loan interest tax deduction as an adjustment to income. You don’t need to itemize
deductions to claim it.

What is student loan interest?

Student loan interest is interest you paid during the year on a qualified student loan. A qualified
student loan is a loan you took out only to pay qualified education expenses that were:
 ● For you, your spouse, or a person who was your dependent when you took out the loan
● Paid or incurred within a reasonable period of time before or after you took out the loan
● For education provided during an academic period for an eligible student
Loans from these sources aren’t considered qualified student loans:
● Related person
● Qualified employer plan
Qualified education expenses are the total costs to attend an eligible school. This includes
graduate school. The costs include:
● Tuition and fees
● Room and board
● Books, supplies, and equipment
● Other necessary expenses, like transportation
You can usually claim the student loan tax deduction if you meet all these requirements:
● Your filing status is any status except married filing separately.
● No one else is claiming you as a dependent.
● You’re legally obligated to pay interest on a qualified student loan.
● You paid interest on a qualified student loan.
If you’re married filing jointly:
● You can deduct the full $2,500 if your modified adjusted gross income (AGI) is $140,000
or less.
● Your student loan deduction is gradually reduced if your modified AGI is more than
$140,000 but less than $170,000.
● You can’t claim a deduction if your modified AGI is $170,000 or more.
If you’re filing as single, head of household, or qualifying widow(er):
● You can claim the full $2,500 student loan deduction if your modified AGI is $70,000 or
less.
● Your deduction is gradually reduced if your modified AGI is $70,000 but less than
$85,000.
● You can’t claim a deduction if your modified AGI is $85,000 or more.

How the student loan interest deduction works

If you pass the qualifications above, you probably want to know how the student loan interest
deduction works. Like any other tax deduction, it lowers your taxable income, and in some
instances could lower your tax bracket.

This deduction is above the line, meaning it’s an adjustment to your taxable income, and you
don’t have to itemize your taxes to claim it. You can subtract up to $2,500 of interest paid from
your income when calculating AGI.