Single filers can avail themselves of as many tax deductions as married filers do -- or even more, since they often have less holding them to one place or job. We asked four Motley Fool contributors what tax deductions single filers should know about.
Dan Dzombak: Single filers can take advantage of the tax deduction for contributing to a retirement savings account. While it is too late to contribute to a 401(k) for tax year 2014, you have until April 15 to contribute to an IRA for that year. However, you should know about certain rules governing the tax deductibility of IRAs.
Image source: Getty Images.
If you are not covered by a retirement plan at work, regular IRAs are always tax deductible. If you are covered by a retirement plan at work, for single filers the tax deduction begins to phase out at a modified annual gross income of $60,000 and phases out completely when modified AGI rises above $70,000. In both cases, for tax years 2014 and 2015, the IRA contribution limit is $5,500. Those age 50 or older can contribute an extra $1,000.
If you are looking to contribute for tax year 2015, contributing to a 401(k) if one is available is often better than contributing to an IRA. This is because many employers match your contributions, which means each dollar contributed to a 401(k) can be worth double that of a dollar contributed to an IRA. Furthermore, you can contribute more to a 401(k) than an IRA. For 2015 the 401(k) contribution limit rose to $18,000, and those 50 and older can contribute an additional $6,000.
Matt Frankel: Single people tend to have more freedom to move than married people do, so it's especially important to be aware of the deduction for moving expenses.
The IRS allows you to deduct certain moving expenses if your move is closely connected to the start of a new job. And this doesn't even mean that you need to have a job lined up before you move.
To qualify for the moving expense deduction, your move needs to pass the "time test" and "distance test" as defined by the IRS. To pass the time test, you must work for at least 39 weeks of the first year following your move; so in theory you could take about three months to find a new job and still qualify. To pass the distance test, your new job must be 50 miles further from your old home than your old job was. For example, if you had a 10-mile commute to work before you moved, your new job needs to be more than 60 miles away from your previous residence.
If your move qualifies, you can deduct such expenses as storage fees for your belongings, the cost of transporting you and your belongings to your new house, and even the cost of a hotel if you have to wait a day to move into your new home. For a full list of expenses that qualify, read the full description.
Moving can be expensive, so if you moved (or are planning to move), this deduction can be worth hundreds, if not thousands, of dollars on your tax return.
Dan Caplinger: Many single taxpayers are still paying down student loan debt from college, and so the fact that many of them can deduct the interest on their student loans comes as a welcome tax break. Single filers with income of $65,000 or less can deduct up to $2,500 in student loan interest from their tax return, as long as they received the loan when enrolled at least half-time in a degree program and used the money solely to pay qualified education expenses. Those who earn between $65,000 and $80,000 are allowed to take a partial deduction of their student loan interest. For instance, taxpayers with income of $72,500 could take half of the first $2,500 in student loan interest as a deduction, losing the other half due to the phaseout provision.
The nicest thing about the student loan debt deduction is that you can claim it even if you take the standard deduction rather than itemizing other deductible expenses. Instead, you're allowed to treat the interest you pay as a direct adjustment to your income, which makes it far more valuable than an itemized deduction for many taxpayers. For struggling graduates, the deduction can be a good way to get back at least a small amount of the money they're paying toward their debt.
Selena Maranjian: You don't need to be married or head of a household to make charitable contributions, and Uncle Sam will reward you for many of those in the form of deductions. There are some rules, of course. For starters, you can't just give to your perpetually needy younger brother, or to a political candidate, and expect to take a deduction. The recipient needs to be a qualified organization. You also must subtract the value of any goods or perks you receive for your donation. So if you donated $100 to an organization and in return received a ball cap worth $15 and a $30 ticket to an event, only $55 is considered your donation.
You'll need to keep records of your donations, including dates and amounts. The IRS explains that, "To claim a deduction for contributions of cash or property equaling $250 or more you must have a bank record, payroll deduction records or a written acknowledgment from the qualified organization showing the amount of the cash and a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift." Also, if you make more than $500 in noncash donations, you'll need to include IRS Form 8283 with your tax return.
Those noncash donations can also reward you well. You might, for example, donate an old car instead of trading it in for a pittance. (Look up the extra rules for car donations first, though.) You might also clean out your closet and donate piles of used clothes (that are still in good condition). Such donations should be valued at their fair market value, which you can look up online. Such items can really add up.
