The move to nearly double the size of the standard deduction has made taxes a lot easier for many Americans — a report from the Joint Committee on Taxation predicts that the number of returns itemizing deductions is expected to drop from 46.5 million in 2017 to just over 18 million for 2018. However, that would still leave nearly 20 million Americans who need to file returns that will lay out specific deductions to ensure that they aren’t overpaying what they owe.
Fortunately, using data released by the IRS, you can find out how many returns claimed each deduction and how much the average deduction was for those from the 2016 tax year, giving you a better sense of how your fellow taxpayers are approaching their itemized deductions. After all, if there’s a common deduction you’re overlooking, it’s entirely possible you’re letting your hard-earned dollars go without having to. Here’s a look at the top tax deductions for the average American, so you can see how others handle itemized deductions.
9. State and Local General Sales Tax Deductions
Number of Returns Claiming Deduction: 9,746,000
Average Deduction Amount: $1,880.57
You’re allowed to deduct your state and local sales taxes from your federal return, though you can’t also deduct your state and local income taxes if you do so. As such, the deduction’s utility is relatively limited to those people who are spending money without earning enough to make their income tax deduction the larger of the two.
Still, nearly 10 million returns claimed a total of $18.3 billion in deductions for state and local sales tax.
8. Charitable Contribution Deductions
Number of Returns Claiming Deduction: 36,937,000
Average Deduction Amount: $6,331.51
Donations to qualified organizations — in the form of cash or some types of goods — are deductible and appeared on 36.9 million returns in the 2016 tax year. In total, those who itemized donations deducted an average of $6,331.51 for a grand total of $233.9 billion.
7. Total Standard Deduction
Number of Returns Claiming Deduction: 103,013,000
Average Deduction Amount: $8,675.27
For every return filed with itemized deductions, there were more than two filed that simply opted for the standard deduction and avoided wading into the complexities of the tax code for an average deduction of $8.675.27 for each return. Of course, with the increase in the size of the standard deduction, the number of people who take this deduction and the total average amount stand to grow significantly in 2018.
6. Miscellaneous Deductions After 2 Percent AGI Limitation
Number of Returns Claiming Deduction: 13,014,000
Average Deduction Amount: $8,878.44
This catch-all includes a wide variety of deductions — from travel-related business expenses to tax preparation costs — but you can ultimately only deduct the amount in excess of 2 percent of your adjusted gross income. There were just 13 million returns that qualified, but those that did scored nearly $9,000 in deductions per return.
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5. Interest Paid on Investment Deductions
Number of Returns Claiming Deduction: 33,485,000
Average Deduction Amount: $9,108.47
Over 33 million filers deducted an average of over $9,000 apiece for interest paid on investments in 2016. It’s worth noting, though, that the vast majority of those — 32.9 million of the total — were in the form of the popular mortgage interest deduction. However, with the amount you can deduct set to fall and the increase in the standard deduction for the 2018 tax year, the total number of returns taking this deduction is predicted to plunge to under 14 million.
4. Medical and Dental Expenses After AGI Limitation
Number of Returns Claiming Deduction: 8,934,000
Average Deduction Amount: $10,095.70
For people with sky-high premiums on their health or dental insurance, you can deduct however much you’re paying for premiums and certain other medical expenses that are in excess of 7.5 percent of your adjusted gross income. And, for almost 9 million filers, that came to an average of over $10,000 a return.
3. State and Local Income Tax Deductions
Number of Returns Claiming Deduction: 33,423,000
Average Deduction Amount: $10,103.22
It should be clear why nearly four times as many filers opted to claim their state and local income taxes rather than their sales taxes: The average size of this deduction was more than five times as much. However, with the total deduction for state and local taxes capped at $10,000 beginning with the 2018 tax year, plenty of those 33.4 million filers might have to reduce their deduction when they file next year.
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2. Gambling Losses and Other Unlimited Miscellaneous Deductions
Number of Returns Claiming Deduction: 1,238,000
Average Deduction Amount: $18,776.25
Yes, you can deduct gambling losses, but before you get too excited, you can only do so up to the amount of your gambling winnings, so that trip to Las Vegas still won’t pay for itself. That said, there are a number of specific expenses that can be deducted without being subject to the 2 percent of your AGI limit, including but not limited to gambling losses, losses to Ponzi schemes, and casualty and theft losses for income-producing properties.
All told, a small slice of American taxpayers qualify — just 1.2 million returns in 2016 — but those who did qualify got a lot back. The average size of the deduction was $18,776.25.
1. Casualty and Theft Losses Deduction
Number of Returns Claiming Deduction: 154,000
Average Deduction Amount: $33,681.82
The average deduction for casualty and theft losses came out to over $33,000 in 2016 even after the reduction by 2 percent of AGI, but this is one deduction you would probably rather not qualify for. Casualty losses are usually in the form of property damage due to natural disasters like hurricanes or tornadoes. So, although the 154,000 people who made such a claim might have split over $5 billion in the process, they likely had to spend a big chunk of their tax savings on recovering those losses.
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Some of the largest tax write-offs were limited to the smallest groups, with just 1.4 million filers including casualty and theft losses or unlimited miscellaneous deductions. Meanwhile, the vast majority of filers were opting for the standard deduction even before it was dramatically increased, so the 2018 tax season seems poised to see an unprecedented number of filers taking the standard deduction.
Click through to see if you’re missing out on any of these commonly missed tax deductions.
More on Taxes
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