How You Can Get Tax Exemption Easily in the US

Benjamin Franklin rightly said that nothing is certain except death and taxes. People generally find taxes hard to understand and even harder to pay. A study reveals that 53% of Americans are bothered by the complexity of federal taxes. Taxes are mandatory for both individuals and organizations in the US. According to a study, more than half of US adults feel they give more than their fair share of taxes. The good news is that tax exemption and deductions are permitted under certain conditions, especially for those donating to a 501(c)(3) nonprofit organization.

Who Can Receive Tax Exemption in the US?

A tax exemption is a reduction or an exclusion of a liability. An individual or an organization can be eligible for tax exemption or relief under specific conditions defined by the Internal Revenue Service (IRS). It grants tax-exempt status to organizations that meet Section 501(c) requirements. For  example, 501(c)(3) nonprofit organizations are tax-exempt. In some instances, individuals are also allowed tax benefits.

The following are some of the conditions that may allow tax exemptions to individuals:

• US citizens working overseas (up to $126,500)
• Low-income Taxpayers
• Taxpayers with many dependents
• Some academic scholarships
• Interest earned on municipal bonds
• Healthcare Service Accounts
• Distributions from Roth IRA, provided they meet certain conditions
• Social Security benefits according to the recipient’s filing status
• Benefits given to veterans or their families by the Department of Veterans Affairs

When it comes to tax deductions, you have two options based on your financial history: itemized deductions and standard deductions.

What is a Standard Deduction?

A standard deduction is a fixed amount that can be subtracted from the gross income or adjusted gross income. It results in a reduction in your taxable income. If the standard deduction amount is more than your possible itemized deductions, you can save money.  Senior taxpayers (aged 65 or older) and blind taxpayers may enjoy extra deductions with this option. The IRS adjusts the standard deduction for inflation annually. Filing a standard deduction is more accessible, especially if you are chasing a deadline to file your returns and have not prepared the groundwork for Itemization. Almost 90% of filers opted for standardization in 2022.

Why Opt for Standard Deduction?

Standard Deduction has two significant benefits.

• It is adjusted every year for inflation.
• It saves you the time and effort required for an itemized deduction.

Standard Deductions vary according to your filing status. Click here to access the complete standard deduction list for the tax year 2024, published by the IRS.

What are Itemized Deductions?

Itemized deductions are particular expenses you can subtract from your gross income or adjusted gross income. The amount is usually different for different taxpayers. The itemized tax deduction is calculated by adding all the applicable deductions and subtracting the sum from the income. Here are some of the things that you may be able to include in your itemized deduction list if they meet certain conditions:

• Charitable donations
• Casualty and theft losses
• Deduction from state and local taxes
• Home mortgage interest
• Unreimbursed dental and medical expenses
• Property tax deductions

Why Opt For Itemized Deductions?

Itemization is the right choice when your total itemized deductions exceed the Standard deduction. In certain situations, you can end up saving a considerable amount of money using itemization. For example, if you are a homeowner, your itemized deductions related to mortgage interest and property tax may exceed the standard deduction by a considerable margin. Those do donate large sums of money to 501(c)(3) nonprofit organizations can also benefit from this option. 

How to Itemize? 

To itemize expenses, one must track all spending throughout the year and keep all supporting documentation, including receipts, bank statements, medical bills, and acknowledgement letters and tax receipts from 501(c)(3) nonprofit organizations like Transparent Hands. You can file your income taxes using Form 1040 to claim itemized deductions. The form can be downloaded and completed using the instructions on this page.

Reasons to Consider a 501(c)(3) Organization for Your Tax Reduction

Get Help From Tax Experts and Software

Itemizing on a tax return can significantly affect your tax savings. However, itemized deductions can be time-consuming and difficult to calculate. Moreover, certain itemized deductions come with conditions you must understand before the declarations. For example, you can only make deductions from the portion that exceeds 7.5% of your adjusted gross income for your medical expenses. You can follow comprehensive IRS guidelines to understand the process thoroughly.

If all that sounds complicated, you can always use tax software for assistance. Some of these software run your returns using standard and itemized deductions separately before making a comparison, thus allowing you to opt for a better option. Tax experts can also help you choose and understand the complexities involved in the process.

How Can You Reduce Your Taxes in the US?

Donate To Transparent Hands

Transparent Hands is registered as a 501(c)(3) nonprofit organization in the US, which means the donations you make to this organization can bring you tax relief. The organization provides various free medical and surgical services to underprivileged communities in Pakistan. Our unique online crowdfunding platform facilitates secure online payments through multiple methods. As an IRS-recognized charity, we have provided over 200,000 free treatments to the most deserving patients belonging to low-income and vulnerable communities. We always issue you tax receipts for your contributions to help you get tax benefits with ease. 

Conclusion

Tax exemptions are allowed for organizations or individuals who meet specific qualifications and requirements. If you do not qualify for these exemptions, you can save money by choosing between itemizing your deductions or taking the standard deduction. Both methods have advantages and disadvantages, so understanding them is crucial for making the right choice. If you donate to a 501(c)(3) nonprofit organization like Transparent Hands, you can receive tax relief by itemizing your contributions when filing your taxes. Transparent Hands ensures that your donations help the most deserving people, and you also receive proof of your charitable contributions. Donate now to change someone’s life and enjoy substantial tax benefits.