5 tax deductions that could save you big bucks in 2017

We all want to save money on taxes. Here are a few key deductions that could lower your tax burden this year.

1. Mortgage interest

Though there are numerous tax breaks available to homeowners, the mortgage interest deduction can be particularly lucrative, especially during the early years of your mortgage. That's because during this time, the majority of your monthly payments are applied to the interest portion of your loan, as opposed to its principal. As long as your mortgage isn't more than $500,000 if you're a single tax filer or $1 million if you're a joint filer, you can write off the total amount of interest you pay for the year.

Tax form 1040


You should also know that if you pay a private mortgage insurance (PMI) premium (which typically applies to homeowners who don't make a 20% down payment) on top of your regular mortgage payment, you may be allowed to deduct that amount as well provided you don't make too much money. You'll be eligible to deduct PMI if you earn $54,000 or less as a single tax filer, or $109,000 or less as a couple filing jointly.

2. Medical expenses

Healthcare costs can be a huge burden for Americans of all ages, but they tend to hit seniors and families with young children particularly hard. The good news is that if your medical costs for the year are high enough, you can deduct expenses that exceed 10% of your adjusted gross income (AGI). Imagine you earn $60,000 but have a health condition that requires you to spend $10,000 out of pocket during the year. You'd be eligible to deduct any amount that exceeds $6,000, which, in this case, is $4,000.

RELATED: 10 ridiculous things we've all said while filing our taxes:

10 things we've all said while filing our taxes
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10 things we've all said while filing our taxes

"It's only January, I have plenty of time!"
You're relaxed, you're casual, what even are taxes anyway? You don't care! It's so far away that filing taxes isn't even remotely on your radar, to be honest.

Photo credit: Getty

"The imminent act of filing is upon me and I literally have nothing ready..."
Tax season is now approaching and that creeping anxiety about getting everything done on time is starting to set in. It's essentially biting at your heels and you know you have to get moving.

Photo credit: Getty

No words. Just emotional paralysis.
You're screwed. You need to start doing your paperwork but you physically do not know where to even begin. It's time. It's happening.

Photo credit: Getty

That anxiety you felt creeping in earlier? Now it's full-fledged onset. This stage is often accompanied by screaming out loud, pulling hair, crying, etc.

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"Wait, did I get all of my papers in? Did I check that one box correctly? Does it look like I'm trying to evade some of these taxes? What if I go to jail? Can I go to jail for that? WHO WILL FEED MY DOG WHEN I AM IN JAIL?!"

It's like handing in an exam in school and wishing you could grab it back and double check your answers one more time.

Who was that celebrity you heard about that went to jail for tax evasion? Because now you're convinced that's totally going to be you.

Spoiler alert: as long as you did everything to the best of your knowledge and ability, you probably won't go to jail. And even if you do, you'll find someone to walk your dog.

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"I got this, I'm almost done, a few more papers and I'm in the clear. I just have to pound through the rest of it. Go me!"

"Go you" is right! Now you're on cruise control and you're on track to get everything done well and on time. You're unstoppable in the delight of the world that is tax filing.

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"Thank god that's over with, now I can relax! What to do with all this stress-free free time!"
Finally, relief. Your papers are filed and sent out into the universe. It's off your back at last. Now on to more important things, like Netflix.

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"When is my return coming? Is this going to be my life for the rest of my life? Yep, it is. So about that return..."
Now, you wait. You want that money. And the inevitable truth that your life will now be a neverending cycle of filing taxes and waiting for your return.

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"SCORE my return was so much better than I expected! I'm buying a new dress. Or five. Probably five, why not?"
You're on a total life-high now. The possibilities of what you can spend your return on seem endless and even if you don't, having a nice bonus hunk of cash in your pocket feels pretty good. It made all of that stress completely worth it.

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"Honestly filing wasn't even that bad this year. And now I don't have to think about it anymore. Well at least not for another year. But no use in worrying about that now!"
Alas, acceptance. You know you'll fall victim to the vicious cycle again when next year rolls around. But truthfully, you wouldn't have it any other way. Okay, you obviously would. But you'll never change your procrastinating ways!

Photo credit: Getty


3. Charitable contributions

Any time you donate cash or goods to a registered charity, you're allowed to deduct the value of that donation on your taxes. All you need to do is retain a receipt acknowledging your contribution. Now to take a deduction for donated items, you'll need to figure out the fair market value of whatever you give away. Some organizations, however, like Goodwill, provide valuation guides that can help with this process.

One thing to keep in mind about charitable contributions is that if you claim too high a deduction, you might trigger an audit. The IRS has data on how much taxpayers typically donate per year based on income level, and if you come across as overly generous, it could wind up hurting you. As an example, those who earn between $25,000 and $50,000 a year take a $2,594 deduction on average. Taking a $10,000 deduction on a $40,000 salary could therefore raise a serious red flag.

4. Job search expenses

Looking for work can be a costly prospect, but if you meet certain criteria and thoroughly document your expenses, you might get a sizable tax deduction out of the deal. Any time you travel to a job interview, you can deduct the costs of getting to and from your destination, including air or rail fare, parking fees, and lodging. You can also deduct the cost of using a career counselor or resume service.

To take a deduction, however, you must be looking for work within your current field. You also can't be a recent college graduate looking for your first job. Furthermore, you can only deduct job search expenses that exceed 2% of your AGI. So if your AGI is $40,000 and you spend $3,000 looking for a new job, you can take a $2,200 deduction.

5. Investment losses

Losing money on an investment is far from ideal, but if you have investments that are performing poorly, selling them for less than what you paid could help you tax-wise. Losses on investments can be used to cancel out taxable gains. So if, for example, you sell one investment at a $5,000 gain but take a $5,000 loss on another, your loss will cancel out that gain, and you won't have to pay taxes on it.

Additionally, if your net investment loss for the year exceeds your gains, you can use up to $3,000 of it to offset ordinary income. And if you're still left with a loss after that, you can carry the rest forward and take a deduction in future tax years.

Of course, these are only some of the deductions available to tax filers. If you're looking to lower your taxes this year, it pays to read up on different deductions and see which ones you're eligible for. The more legitimate deductions you claim, the more hard-earned cash you'll get to save.

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