TAX Resources » Tax$aversItemized DeductionsMust-know deductions for every taxpayerHow do you know whether you are capturing all the deductions you are allowed to effectively reduce your taxable income? Medical & Dental CostsMedical and Dental expenses are generally deductible to the extent they exceed 7.5% of your income. Some of the more common expenses:
TaxesThe following taxes are generally 100% deductible.
Interest ExpenseWhile most personal interest is no longer deductible (credit card interest, car loans, and the like), there are still interest expense deductions available to you.
Charitable Contributions(donating money or property)
Tax$aver Tip: Make sure you also keep track of your mileage to and from the charity. It is also deductible. Casualty & Theft LossesCasualty and Theft losses are generally deductible to the extent they exceed 10% of your adjusted gross income, are not reimbursable via insurance, and each event exceeds $100.
Miscellaneous DeductionsMost miscellaneous deductions are only deductible to the extent they exceed 2% of your adjusted gross income. Items with an “*” are usually not subject to the income threshold.
Non-deductible ExpensesThe following are non-deductible items:
New as of 2002: If you are a teacher you can deduct up to $250 in non-reimbursed classroom expenses. This deduction is available even if you do not itemize deductions on your tax return. Tax Savings TipsTax$aver Tip #1: Expense ShiftingWhenever possible shift expenses into categories of itemized deductions to surpass the IRS thresholds in a given year. Example: You have surgery during the year resulting in high medical costs for that year. The IRS 7.5% of income threshold is surpassed, so every incremental Medical and Dental expense is now deductible. If possible, now is a good time to get eyes checked, to get family physicals, and to get other medical and dental work completed. Next year you will have to again reach the 7.5% threshold before you can deduct the expense. The same holds true for thresholds related to Casualty/ Theft losses and Miscellaneous Deductions.
Tax$aver Tip #2: Miles, Miles, MilesCapture all your mileage for business travel, charitable travel, and medical travel. Keep a log book in your car and note the miles to and from the doctor or dentist. Track the miles to drop off charitable donations, or to go to and from your charity. This area of deductible expense is often not taken or is poorly captured. Tax$aver Tip #3: Missing a few thingsWhat is deductible? What is not? When in doubt save the canceled check, the proof of payment, and/or receipt. Without the proof, the expense cannot be taken. Tax$aver Tip #4: Non-cash donationsHow many times have you dropped off a bag of clothes or an old lamp and not kept record of the gift? All of these donations are deductible and not subject to a minimum threshold as with medical expenses or miscellaneous deductions. Keep a list of items you plan to give away. Put the list next to or inside the bag of items you plan to drop off. The required itemization of items donated can be prepared when the bag is ready to be dropped off at your favorite charity.
Tax$aver Tip #5: Receipts, Receipt, ReceiptsOften during IRS audits, deductions are disallowed because proper documentation of the expense is not retained. Keep all canceled checks, receipts, and statements related to your expense. |
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