How to Identify Tax Deductions

Possible tax deductions include interest paid and medical expenses.

Possible tax deductions include interest paid and medical expenses.

Tax deductions reduce the amount of income you pay tax on. When you file your tax return, you have the option of claiming the standard deduction or itemizing deductions using Schedule A. It only makes sense to itemize if the amount of the deduction is more than the amount of the standard deduction. You might be able to claim a few deductions without itemizing as well.

Look at Student Loan Interest

You cannot deduct the interest you paid on credit card debt or a car loan, but you can deduct the interest you paid on student loans. To deduct the interest paid on a student loan, you need to have a modified adjusted gross income of less than $75,000 if you are single ($150,000 if married filing jointly) as of 2012. You cannot deduct the interest if you borrowed the money from a relative or from an employer's plan. As of 2012, you can deduct up to $2,500 in student loan interest. The deduction is "above the line," meaning you can claim it without itemizing.

Look at Mortgage Interest

The interest you paid as part of your mortgage is also deductible. Unlike student loan interest, you need to itemize to claim the deduction. You need to live in the house for at least a portion of the year to claim the interest deduction. In most cases, all the interest you paid is deductible, as long as you assumed the debt after 1987 and it is less than $1 million for the purchase of the home or less than $100,000 for home equity.

Look at Medical Expenses

You might be able to deduct some medical expenses if you itemize and the amount of the expenses is more than 7.5 percent of your adjusted gross income as of 2012. After 2012, the amount increases to 10 percent of your AGI. You can deduct health insurance premiums without itemizing if you are self-employed. Medical expenses you can deduct include the cost of a doctor or dentist's appointment, the cost of prescription medication and the cost of contact lenses or eyeglasses. You cannot deduct the cost of over-the-counter medicines, non-prescription smoking cessation products or cosmetic products. General toiletry supplies such as toothpaste and soap are not deductible either.

Look at Donations

Deduct the amount you donated to a charitable organization, such as a religious or educational organization. You need to itemize to claim donations as a deduction. If you donate goods, such as an old computer, you can claim the market value of the item as a deduction. If you donate money, you can claim the full amount as a deduction, as long as you did not receive a benefit. For example, if you made a $100 donation but received a $50 concert ticket in exchange, you can only deduct $50, the amount of your donation after the ticket's value is subtracted.

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