Sending in mortgage payments and chipping away at your student loan debt might be painful throughout the year, but at tax time these debt payments can help lessen your obligation to Uncle Sam. If you haven’t already filed your taxes, you may be able to cash in on these tax breaks.
College tuition and fees
If you attended college during the 2015 school year, this big deduction can lower your tax. The American Opportunity Tax Credit allows you to claim up to $2,500 per student as long as your adjusted gross income (AGI) is at or below $80,000 for single filers and $160,000 for married filers. The credit can be used toward required course materials (books, supplies and equipment) as well as tuition and fees.
Student loan interest
If you’re paying back student loans, you can deduct up to $2,500 of qualified student loan interest per year. The fine print: Your modified AGI must be $65,000 or less if you’re filing as single or head of household. If you’re married and filing jointly, your modified AGI must be $130,000 or less. If your AGI is between $65,000 and $80,000 (single) or $125,000 and $160,000 (married), you could qualify for a smaller deduction.
Mortgage interest can take a big chunk out of your monthly payment, but it’s mostly all tax deductible. You can deduct the interest paid on home loans up to $1 million, or $500,000 if you’re married and filing separately (as each spouse can deduct up to half of the $1 million). If you have a second home, you can write off that interest as well — as long as the total for both your primary and secondary homes is under that limit.
Private mortgage insurance
If you didn’t put at least 20 percent down when you purchased your home, you’re likely dealing with a pesky called Private Mortgage Insurance (PMI). This too might be deductible at tax time if your loan was acquired in 2007 or later, the home is your primary residence and your AGI is less than $109,000 (or $54,500 for married taxpayers filing separately).
If you’ve jumped on board with the ridesharing economy, or you use your car for making deliveries, for example, that set of wheels could deliver a deduction on your taxes. For 2015, the maximum first-year depreciation write-off for a new (not used) car is $3,160 plus up to an additional $8,000 in bonus depreciation, according to TurboTax’s tax tips for small businesses.
For a used car, the maximum first-year write-off for 2015 is a much lower $3,160. (These figures assume 100 percent business use.) If you bought a sweet SUV ride to pick up and drop off riders — or packages, you may be able to claim a much bigger deduction.
Beware, however, you can only take this deduction in the first year you began using your car. If you weren’t using it for business at the time, you’re out of luck.
While tax breaks will never make up for the expense of these debts, the deductions will at least lessen the blow of your final tax bill — or put a few extra dollars back in your pocket.