Common Deductions You Can Write Off On Your Taxes

No one enjoys the ordeal that is filing their taxes. You can simplify the tax-filing process by making full use of all allowable deductions.

You undoubtedly already know that there are some costs that qualify for a tax deduction. The goal of this article is to help you reduce your taxable income by introducing you to some of the more prevalent deductions.

It's unfortunate that taxes must be paid, but they're essential. In any case, there are several things you can deduct from your taxes that will help lower the total amount you owe at the end of the year. This post is for you if you're confused about which tax breaks might be relevant to you.

This is the post for you if you're hoping to reduce your tax bill. The following is a list of the most frequently claimed tax deductions. Make use of these opportunities if they apply to you when submitting your taxes next year.

As we approach tax season, many of us will begin to carefully consider our outgoings in an effort to identify any deductions that may be available.

To get the most bang for your buck when it comes to deductions, you need to zero in on the ones that truly help you save money by lowering your taxable income. In this section, we will discuss some of the most frequent discounts that customers get.

You might believe that you don't have to worry about anything in regards to your taxes. However, there are a few tax deductions that will end up saving you a lot of cash.

This is the information you need to understand the deductions. Before anything else, you can get a tax break for money given to good causes. You can help those in need by donating to a church, a secular charity, or an individual in need.

Gifts of property (including works of art) made within the previous three years may be deducted from an individual's taxable income if they are not retained by the donor. If someone else is covering your travel expenses while you are on business, you may be eligible for a tax break.

If you are one of the fortunate few who has already met with their accountant, they may have given you a list of deductions that can be claimed this year. If not, though, you need not fear; we've got your back. The following is a catalogue of the most frequently used inferences.

Ready to get started? Check out our guide below.

Enjoy reading!

Rules of Thumb

The cost must have been incurred in the 2020-201 1 fiscal year

You can write off work-related costs by doing the following:

• you should have paid for it out of pocket and not gotten any money back.
• It must be a legitimate business expense that contributes to your bottom line.
• Expenses must be documented so that they can be justified.

The cost can't be discretionary, local, or capital-intensive. The money spent on things like gas and meals on a daily basis are examples of personal expenditures.

• If a cost had both a business and personal component, only the business component could be deducted from your taxable income.
• Any depreciation in value of the depreciable assets you purchased may be written off if the expense was capital in character. Expenses outweigh gains in the case of depreciating assets.
• For information on how to determine how much of a 2020-21 expense was allowable due to prepayment for services, check out advance expenditure.

You cannot claim a deduction for an expense if:

• whether the expense was covered by a third party,
• you were or will be paid back for the purchase,
• The money is considered a perk for employees (including an exempt benefit).

It was only possible to submit the amount of the expense that was not covered by reimbursement.

How can I claim a tax deduction?

Tax returns can be amended to include "work-related deductions" for costs incurred directly in the course of employment. There are some requirements you must complete before you may take a tax deduction for your job:

• You Need a Paper Trail to Show That
• Obviously, you are the one who used the funds.
• You obviously did not get your money back from whoever paid for it.
• A work-related expense is one that is directly tied to your job.

Only the business-related element of a dual-use expense can be deducted from your taxes.

Claiming deductions

Some costs can be deducted from your taxable income when filing your taxes. The vast majority, however, are necessary expenditures made in pursuit of a wage or salary. People who don't speak English can benefit from this material because it has been translated into other languages.

As an employee, you can be eligible for tax breaks for business costs you incurred. A cost was incurred by you in 2020-21 if you:

• you have been sent a bill or invoice for a payment that you are responsible for making (even if you pay it after 30 June 2021), or
• The expense was made without sending you a bill or invoice.

Such costs consist of:

• Expenses related to cars, such as those for gas and maintenance
• travel charges
• expenses related to apparel
• educational costs
• union fees
• home computer and phone expenses
• tools and equipment expenses
• journals and business publications.

Some non-work-related deductions may also be available to you. These items are:

• investment interest, dividends, and other write-offs
• tax write-offs for donations
• tax preparation expenses can be deducted.

Work-related expenses

You can write off work-related costs by doing the following:

• If you didn't get paid back for the money you spent, then you did so on your own.
• Your outlays must have a direct bearing on the production of your cash flow.
• You Need a Paper Trail to Show That (usually a receipt).

You can only deduct the portion of the expense that was necessary for business reasons if the money was also spent on personal things. Your employer-reimbursed business costs are not tax deductible.

We may approach your company for reimbursement if we determine that it is appropriate to do so.

In some cases, you may be eligible to deduct the following work-related expenses:

• Transport and travel expenses
• Clothing, laundry and dry-cleaning expenses
• Working from home expenses
• Self-education expenses
• Tools, equipment and other assets
• Other work-related deductions

Any worker (permanent or temporary) can deduct work-related costs in the tax year in which they occur. So, if you start a new job in June but don't start receiving money from it until the following income year, you can still deduct costs you incurred in June connected to that job.

Generally speaking, you cannot claim a deduction for hiring someone to help you with your job.

Personal Education costs

Expenses for self-education that are directly related to your job might be claimed. The training you receive must result in a recognized certification that satisfies the requirements listed below.

• Your present job's prerequisite knowledge and abilities must be maintained or improved by the training.
• cause or are likely to cause a rise in your income
• Self-education costs without a strong enough link to your current employees are not eligible for reimbursement.

Regarding your own education, you may deduct the following costs:

• both lodging and food (if away from home overnight)
• computer supplies
• costs for courses or tuition
• Depreciating assets' value decreasing (cost is greater than $300)
• purchase of technology or equipment for no more than $300
• equipment upkeep
• fares
• operational costs for a home office
• interest
• online activity (excluding connection fees)
• paid parking (only for work-related claims)
• phone calls
• postage
• stationery
• student union dues
• services and amenities for students
• textbooks
• scholarly, professional, or trade journals
• travel to and from the school facility (only for work-related claims)

You may only deduct the portion of a cost that is connected to your self-education if it is partially for one reason and partially for another.

Travel costs and vehicle expenses

The most crucial thing to bear in mind when it comes to vehicles and travel expenses related to your job is to keep records. Come tax season, this will greatly simplify your life.

If you use your automobile for work, you can deduct the travel costs for business trips that are associated with using your car for work.

You can reimburse yourself for your car expenses in a number of ways. Each of these ways has certain record-keeping requirements and each one requires that you own the car in order to be eligible.

Daily commutes to and from the office are not admissible as business travel.

Regular commutes from home to work are considered private travel, thus you cannot recover the expense of those journeys even if:

• You perform little duties en route to work, like picking up the mail.
• You return to work to attend a security callout or parent-teacher conferences.
• You put in extra hours, yet there is no public transportation accessible to take you home.

Using a mobile device

If you paid for these expenses and have receipts to back up your claims, you can claim a deduction if you use your personal phone for work.

You will need to calculate the percentage that logically connects to your work use if you use your phone for both private and professional purposes. You are not permitted to recover phone costs that have already been paid for by your company.

You need to pick a typical four-week period from anywhere in the tax year in order to calculate your deduction.

The percentage of use for work during those four weeks must be calculated if you have a phone plan with an itemized bill. That can then be used for the entire year.

The proportion should ideally be determined using a reasonable foundation.

Donations and Presents

If the organization you donated to is a deductible gift recipient, you can only claim gifts or donations made to them (DGRs). For a gift to qualify for a tax deduction, it must meet four requirements:

• The contribution has to go to a DGR.
• Everything you give as a gift must actually be a present.
• It must be in the form of money or property, including financial assets.
• Any applicable requirements must be met by the donation. It is advisable to always check as several DGRs have various conditions.
• Depending on the kind of present, a certain amount may be claimed. It must be at least $2 for the money. Depending on the type and value of the property, different restrictions apply.

What amount to claim

If you give a financial donation worth $2 or more, you are eligible for a tax deduction. Depending on the type and value of the property being given, different restrictions apply.

In the tax return for the year in which the gift is made, you may claim the deduction. Whether or not you qualify for a deduction should be stated on your receipt, which you will need to verify the claim.

You might use your web receipt or credit card statement to support the deduction if you made a $2 donation over the phone or through the internet.

The receipt you received if you made a donation through a third party, such as a bank or retail store, is also acceptable. Your payment summary will indicate how much you donated if you made a donation through the "workplace donating."

Deductions for working from home

Parts of the costs associated with maintaining a home office can be written off as a tax deduction if you conduct all or some of your professional activities from there. Ideally, you ought to have a space designated for a home office.

While you do not need to designate a specific room for your home office claim, if you utilize a room that serves more than one use (such as a dining room) or a room that is shared with people (such as a living room), you can only deduct expenditures for the time you have the space to yourself.

Maintaining documents for your home office is crucial, just like with anything tax-related. If you work from home, you might be eligible for reimbursement for costs associated with computers, phones, and other office equipment. Any electrical running costs are also deductible.

For products costing $300 or more, you can generally claim a reduction in value. You can also claim home office equipment, such as laptops, up to that amount. If a portion of your phone bill was for business purposes, you can additionally deduct that.

Clothing and laundry costs related to the job

Do you have to dress in a suit for work? You can also be required to wear a uniform with your company's emblem on it. Maybe you have to wear clothes you bought at your place of employment since you work at a clothing store.

In any event, you must adhere to your employer's dress code, so it's possible that the taxman will assume the same of you when it comes to deducting the cost of your work clothes from your taxes.

What apparel is refundable?

Only clothing associated with your profession, such as chef's pants, may be claimed. Clothing that is not specific to your line of work cannot be claimed for the cost of laundry or purchase. Black pants and white collar shirts are a couple of examples.

To protect oneself from harm or illness, you can, however, claim the clothing and shoes you wear. If you work outside, for instance, you can claim sun protection.

If it carries your company's emblem or falls under your employer's uniform policy, uniform-specific clothes may be claimed.

Professional organizations, magazine memberships, and union dues

You may be a subscriber to an association as a result of your profession; the good news is that you can do so. Your dues are additionally deductible if you belong to a union.

Subscriptions to magazines related to your line of employment as well as magazines themselves can reduce your return. Financial research services and publications are reimbursable if you're an investor. Therefore, plan ahead and prepay next year's costs before June 30 to qualify for a deduction now.

Taxes deductible Possibility of Claim

Your tax return needs to be filed soon, so you should start considering any work-related and income-producing costs you incurred throughout the fiscal year.

Some expenses may be eligible for tax deductions, which would lower your taxable income.

The following factors should be taken into account when identifying expenses that can qualify as tax deductions:

• Was the expense directly tied to your employment or other sources of income?
• Did you spend the money and receive no reimbursement from your employer?
• Do you have a formal record of the expenditure, such as a receipt or bank statement?

Determining the percentage of the expense pertaining to your employment or income-generating activity is necessary if the expense was for both personal and professional use (such as home internet).

1. Office expenditures at home

There are various home office expenses you may be entitled to deduct from your taxes since many of us were working from home during the coronavirus epidemic.

These comprise:

• Internet and telephone charges
• stationery and computer supplies like printer ink and paper

You may be eligible to claim one of the following for home office furniture and equipment (such as computers, phones, printers, and furniture):

• If less than $300, the full cost of the items; or
• The value loss (also known as depreciation) for things costing more than $300.

Remember that most people are unable to assert:

• home costs such as rent, rates, and mortgage interest
• the price of basic home goods like milk, coffee, and tea

Before including a deduction for home office costs in your tax return, you need to take into account a few factors.

For instance, you should think about whether you may use the temporary ATO "shortcut method" (of 80 cents per hour for any additional running expenditures) for the 2019–20 tax year, from 1 March 2020 to 30 June 2020, and for the 2020–21 tax year, from 1 July 2020 to 30 June 2021.

Other approaches to the calculation can be more suitable for your situation and acceptable. But you should think about which approach is ideal for you and the requirements you must fulfil in order to qualify for a discount. The ATO website has more information on work-from-home expenses.

Additionally, keep in mind that your ability to deduct some costs from your taxes will depend on your unique situation. On the ATO website, you can learn more about the deductions you can make.

2. Transportation and travel costs

While you typically cannot deduct costs for travelling to and from your regular place of employment, you may be able to deduct some work-related vehicle and travel costs.

These consist of:

• if your job demands you to travel to various offices or locations
• When you need a car to execute your job duties, your auto expenses
• When you have to travel for work, lodging costs

On the ATO website, you can learn more about the travel and car expenditures you can deduct.

3. Dry cleaning, laundry, and clothing

Suppose you invested in work-related attire such as protective gear, uniforms, or attire unique to your line of business. Then you might be eligible to deduct these charges from your taxes along with any associated cleaning fees.

You probably won't be able to claim expenses for customary attire or optional work uniforms, either.

You need to have written documentation of these costs, such as journal entries and receipts, in order to deduct them from your taxes.

On the ATO website, you can learn more about the clothing, laundry, and dry cleaning charges you can deduct.

4. Instruction

You might be able to claim a tax deduction if your studies were work-related and you enrolled in an appropriate course.

On the ATO website, you can learn more about the course expenditures you can deduct.

5. Deductions relating to the industry

Tax deductions are also available for costs that are directly relevant to your line of business and industry.

To find out what industry-specific tax deductions are available, see the ATO website's list of jobs and industries.

6. Extra costs relating to your job

Depending on your job and personal circumstances, you might be able to deduct additional work-related expenses from your taxes. Costs to take into account include:

• Books, magazines, and subscriptions to online information
• protective sunglasses and safety goggles
• Extended meals
• Union dues, association dues, and commissions for bargaining agents

Gifts and Donations

You might be able to claim a tax deduction if you donated a gift or donation to a company (like your preferred charity). But there are precise guidelines that must be followed.

In general, if the donation was made to a "deductible gift recipient," you can claim any amount you made above $2. Nevertheless, there are distinct guidelines for different types of gifts.

On the ATO website, you can learn more about gifts and donations that you can claim.

7. Investment earnings

Depending on the following factors, you can be eligible to claim investment income tax deductions:

• interest accrued on savings
• dividends from your share investments
• Rental income from a rental property for investment
• An additional source of investment income

If you have received any of these, you may be eligible to make a claim for expenses associated with this income, such as interest paid on loans used to purchase stocks or rental properties.

Additionally, you might be able to claim the money you spent on investing advice.

Visit the ATO website to learn more about the income-producing deductions you are eligible to claim.

Keep all of your expense records even after you've filed your tax return. The ATO could ask you for proof of any assertions you make.

On the ATO website, you can learn more about the tax deductions you are eligible to claim.

Keeping track of costs associated with work

If the total of the deductions you are claiming is more than $300, you must be prepared to support your claims with documented documentation.

Your financial records must demonstrate the entire amount, not just the portion that exceeds $300. The $300 does not cover expenses for the award transport payments allowance, the car and food allowance, or the trip allowance.

For these claims, there are specific written proof rules that are described in the pertinent items.

You do not need written proof if your total claim is $300 or less, but you must be able to demonstrate how you calculated your claim.

Investments and interest

For expenses incurred while earning interest, dividends, or other types of investment income, deductions may be made.

You may deduct account maintenance costs for investment-related interest income. However, if you have a joint account, you can only collect half of the fees, so keep that in mind.

If you borrowed money to buy shares and dividends, you can deduct the interest you paid on that loan. However, you must divide the borrowed funds if they were utilized for both personal and revenue-generating objectives.

Income security coverage

You may deduct insurance premiums that you pay for coverage against income loss.

However, avoid making the error of including life insurance, critical care insurance, or trauma insurance as they are not permitted deductions. Additionally, plans purchased with contributions from your superannuation are not permitted.

Advance expenditure

You can only deduct the amount that pertains to 2020–21 if you prepaid money for a service that costs $1,000 or more and will last longer than 12 months or until June 30, 2022 (such as a subscription to a journal relevant to your line of work). You may also write off the portion of pre-paid expenses from a prior tax year that pertains to 2020–21.

Allowances

You could deduct the expenses that the allowance covered if you received one and listed them as an item on your tax return, but only if:

• You actually incurred those costs to generate your revenue from employment, and
• The fundamental guidelines described on the previous page have been met.

For instance, if your tool expenses were $300 and you were given a $500 tools allowance:

• You claim the entire $500 tax credit as item 2 on your tax return.
• At item D5, you make a $300 deduction.

The decrease in value of an asset that depreciates

In the tax year 2020–21, if you used an asset that was subject to depreciation that you owned to create income that you recorded on your tax return, you might be eligible to claim a deduction for the value drop that the asset experienced.

A limited effective life asset that has a realistic expectation of losing value over the course of time is referred to as a depreciating asset. Depreciating assets have a limited effective life. Assets that decrease in value over time include things like tools, reference materials, computers, and office furniture, among other things.

A declining asset's value fall is calculated based on its useful life. As a result, you can either determine its useful life yourself or use the Commissioner's effective life calculations (for help with both, see Taxation Ruling TR 2020/3 Income tax: effective life of depreciating assets (applicable from 1 July 2020)).

It is possible that you will be granted permission to quickly deduct the whole cost of depreciating assets that cost $300 or less, provided that certain standards are met.

In charge of your deductions

For the majority of spending, you must keep records. Use the ATO app's myDeductions feature to keep track of both work-related and personal expenses in one spot. It speeds up the process of submitting your tax return and makes information collection on the fly simple.

The myDeductions tool can be used for:

• your records there.
• Your tax return can be prefilled.

If you work with a licensed tax advisor, you can email them a copy of your records or have them uploaded directly to their software management system.

• Your ability to keep records is aided by the myDeductions record-keeping tool.
• all costs associated with the job (including car trips)
• deductions for interest and dividends
• donations or gifts
• the price of running tax affairs
• expenditures and revenue for a single-person firm
• additional deductions