Tax Deductible Purchases

Hello, readers! Welcome back to the Hoods Tax & Accounting blog! If this is your first time here, welcome! We’re delighted to be able to share up-to-date information about taxes, bookkeeping, and accounting. Our blog is also dedicated to educating you about tax-advantaged savings accounts, tax provisions, programs, and more! We aim to provide you with the tools needed to meet your short and long-term goals. Our seasoned professionals are experts on the tax code, eligible deductions, and QuickBooks—all necessary fundamentals for saving you money! The Hoods Family has been around since 1988 and our comprehensive accounting and tax planning services are among the best in the Lowcountry. If you’re in need of tax preparation, accounting, QuickBooks training, or business consulting services, do not hesitate to schedule an initial consultation! We are officially in tax season, and Tax Day is fast approaching. We recommend preparing early to maximize your savings and refund. We do offer contactless services using a combination of over-the-phone consultations and digital drop-offs, for safety and convenience. You can read more about our hours and submit a request for a meeting using our website!

We are now in the month of April, and Tax Day is only a few days away! That’s right, Tax Day is April 18! Are you prepared? No worries if not– You still have some time. If you need help filing, don’t hesitate to reach out to us! Our knowledgeable tax professionals are eager to assist you and take some of that stress off your shoulders. We are also available to answer any questions you may have. Keep in mind that we offer a convenient and secure online portal to upload tax documents and review your return, which will save you a trip to our office! In the meantime, let’s get into today’s topic. 

As the time comes to file taxes, many people are eager to figure out what tax deductions they may be eligible for. A tax deduction is a reduction of income that is able to be taxed. This is a form of tax incentive, and it lowers the amount of taxes that you owe. There are a variety of different tax deductions out there, and what you are eligible for will largely depend on your lifestyle and income. It is always best to know about possible deductions ahead of filing your taxes so that you don’t miss out on possible savings. A tax professional can help you determine what deductions you are eligible for. If you are interested in learning about some of the tax-deductible purchases you may be eligible for, you’re in the right place! Let’s take a look. 

Classroom Expenses

If you are a teacher, it is likely that you have used your own savings from time to time to purchase supplies for your classroom. Luckily, the Educator Expense Deduction is the primary tax break for K-12 teachers. In order to qualify for this deduction, you must meet certain criteria. First and foremost, you must have worked as a teacher, counselor, principal, instructor, or aide for students in grades K-12. Unfortunately, college professors are not eligible for this deduction. You must have worked at least 900 hours at a school certified by the state. This could be a public, private, or religious school. Finally, you had to have spent money on “qualified educator expenses.” Qualified educator expenses include books, school supplies, computer equipment including software, and any item appropriate and beneficial to students and the classroom. Since the COVID-19 pandemic, the list of qualifying expenses has been updated to include Personal Protective Equipment (PPE), sanitizer, disinfectant, and plexiglass. As long as you have not received reimbursement for the items, you can qualify for the deduction. In other words, if the school or parent-teacher association paid you back for the items, you can’t deduct them. A teacher can deduct a maximum of $250 in qualified educator expenses. If you are looking to utilize the Educator Expense Deduction, it is a good idea to keep a file of your receipts whether it is through physical copies or by writing everything down in a notebook. 

Charitable Gifts

Have you donated to a charity in the past year? Your gift or donation could be eligible for a deduction. In order to be eligible for this tax deduction, your donation must have gone to a nonprofit group or organization approved by the IRS. You can search for a particular organization using the IRS website. Some types of organizations included are religious, charitable, or educational. No matter how small the donation, you will need some kind of proof in order to write it off on your tax return. This proof may be a bank record or a receipt with the charity’s name and donation amount. This deduction does not include pledges to make a donation– It only counts if you actually followed through with your donation. Volunteer work can also be eligible for this deduction. For example, you can write off out-of-pocket expenses for materials, supplies, stamps, parking, stationery, and tolls. If you participated in a charity bake sale, you can write off the cost of the ingredients you used. There are limits to the amount you can deduct– Generally, you cannot exceed 60 percent of your Adjusted Gross Income (AGI). With that being said, you will want to keep a record of the charitable donations or contributions you made during the year if you plan to write them off later.

Medical Expenses

If you have recently been in the hospital or had a costly medical procedure, you may be eligible for a tax deduction. In 2022, you can deduct qualified, unreimbursed medical expenses that are more than 7.5% of your 2021 AGI. Some things that count as a medical expense are hospital or nursing home care, acupuncture, addiction programs, prescription drugs, reading or prescription eyeglasses, hearing aids, wheelchairs, and service animals. You can find the full list of eligible medical expenses here. You are only allowed to include medical expenses you paid during the year that were not reimbursed. That means if insurance paid your bill, it is not eligible for a deduction. Additionally, things such as cosmetic surgery and over-the-counter medicines are not eligible. This deduction is especially beneficial for anyone with a chronic medical condition. We recommend that you save all of your medical bills and other records of expenses throughout the year so that you have them all in one place when it comes time to file taxes. We previously wrote a blog all about writing medical expenses that you can check out here!

Gifts for Customers

If you are a business owner or work for a business and give gifts in the course of your business, you may be able to deduct part of the cost. However, you can deduct no more than $25 per person. For example, if you give four gift baskets to clients as a thank you, you can deduct $25 per basket. It is important to note that this deduction only applies toward gifts to individuals. If you give a gift to an entire company, it is not eligible for the $25 limit– You may be able to receive a larger deduction, depending on the price of the gift. Things like adding gift wrapping or a gift tag to a gift do not count towards the deduction, as they are considered “incidental costs”. Identical items that are widely distributed, such as pens or bags with a company name on it, are not eligible for a deduction. If both you and your spouse give gifts, you are both treated as one taxpayer regardless of the circumstances. This means that you cannot each deduct $25– You will only receive a single deduction.

These are just a few of the possible tax deductions available to taxpayers. With any deduction, it is helpful to keep records or receipts of your expenses in a safe and easily accessible place so that you can view them when it is time to file taxes. We hope you found this article informative, and we thank you for reading. If you have any questions regarding your taxes, or if you still need help filing, contact us! As stated above, Hoods Tax & Accounting offers a variety of services including small business consulting, QuickBooks training, tax preparation, accounting, payroll, and more! Visit our website for more information, as well as helpful links to resources you may find useful. Thank you for reading and we hope to see you back next time to keep learning about various tax and accounting topics!