Taxpayers will have more time to do their taxes this year because the deadline to file a return and pay federal taxes has been extended to July 15 due to the COVID-19 coronavirus crisis. And while you have more time to pay, you still want to make sure you're paying as little as possible by making smart choices about deductions you claim.
Taxpayers have the option to itemize on their tax returns. Itemizing means claiming specific deductions, rather than the standard deduction every taxpayer is eligible for.
For many people, itemizing isn't the right move because the standard deduction nets more tax savings. If you're one of them, you may feel disappointed about losing the chance to take specific deductions. The good news: There are some you can still claim even if you don't itemize. Here are four of them.
1. Student loan interest
If you have qualifying educational debt you're required to pay for yourself, a spouse, or a dependent, you can deduct up to $2,500 in student loan interest from your taxes even if you don't itemize. This limit is per-return, so married couples who both have student loans can still deduct a maximum of $2,500.
You're eligible to claim this deduction only if you're not claimed as a dependent on anyone else's taxes and you can't file as married filing separately.
There are also income limits. For singles, your deduction is reduced with a modified adjusted gross income (MAGI) above $70,000 in 2019, and phases out entirely with a MAGI above $85,000. For married couples filing jointly, the deduction is reduced once your MAGI hits $140,000, and disappears when it's over $170,000.
2. IRA contributions
You can get a tax deduction for contributing to an IRA even if you don't itemize.
For the 2019 tax year, you can contribute up to $6,000 to your IRA and can make an additional $1,000 catch-up contribution if you're 50 or over. But if either you or your spouse has a workplace retirement plan, the deduction for IRA contributions phases out and eventually disappears if your income gets too high.
IRA contributions can still be made for the 2019 tax year up until tax day, so it's not too late to contribute for last year. The IRS has currently extended the tax filing deadline until July 15, but it's not yet clear if this means the IRA contribution deadline will be extended. In the past, the IRA deadline has been extended along with the filing deadline for those affected by disasters. But if you want to be sure you're able to contribute, it's best to do so ASAP.
3. HSA contributions
If you're eligible to contribute to a health savings account (HSA), you can contribute up to $3,500 if you have a single healthcare policy or up to $7,000 if you have family coverage for the 2019 tax year. If you're 55 or older, you can contribute an additional $1,000.
Not only can you deduct the contributions you make to your healthcare plan, but you can also make withdrawals to pay for qualifying health expenses without owing taxes.
Contributions can also be made to these accounts until tax day for the 2019 year, so you can still make your contribution. Again, it's not yet clear if contributions must be made by April 15 or until July 15 due to the extended filing deadline, so you may want to err on the side of caution and invest soon if you can.
4. Deductions for the self-employed
If you work for yourself, you have to pay the entirety of your Social Security and Medicare taxes, while employers normally pay half these taxes in a traditional employment relationship. This is often called self-employment tax.
The good news is, you can deduct half of self-employment tax regardless of whether you itemize. This helps to defray some of the added tax costs you incur when you don't get traditional W-2 income.
Make sure you claim all the deductions available to you
While you should opt for the standard deduction over itemizing if doing so will save you more on your tax bill, you can definitely benefit by looking for every other deduction you can claim along with it.
Just be sure to research eligibility requirements carefully to make sure you're entitled to any deductions you claim. You don't want to end up underpaying on your taxes and owing penalties because of it.