Overlooked tax deductions |
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Every year, the IRS dutifully reports the most common blunders taxpayers make on their returns. And every year, at or near the top of the list, is forgetting to enter a Social Security number or making a mistake when entering the nine digits that identify taxpayer to IRS computers.
Who knows how many people forgot -- or never knew about -- a deduction that could save them money? That’s not the kind of thing over which government bean counters lose a lot of sleep. |
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It's all too easy to miss a trick and pay too much. Years ago, the head of the IRS told Kiplinger’s Personal Finance magazine that he figured millions of taxpayers overpaid their taxes every year by overlooking just one of the money-savers listed below. Here are the 11 most overlooked tax deductions. Claim them if you deserve them, and cut your tax bill to the bone.
Tax Preparation FeesThere might be a double benefit of having us prepare your return. The cost of filing your taxes is deductible under miscellaneous itemized tax deductions. It's subject to 2% of your AGI limit.Moving ExpensesYou can usually deduct moving expenses if you move because you change jobs. However, there are several requirements you must meet, such as a distance test and a time test.Casualty or Theft LossesIf you lose property through a casualty or theft, you may be entitled to a tax deduction. Such casualties would include car accidents, fires, vandalism, disasters such as hurricanes or another identifiable event that is sudden, unexpected or unusual in nature. If your property is covered by insurance, you subtract any insurance or other reimbursement you received or expect to receive when you figure your loss. You claim your casualty or theft loss on Form 4684, Casualties and Thefts.Medical ExpensesIf you itemize your deductions, these expenses are deductible only when paid by you, and the unreimbursed expenses exceed 7.5% of your adjusted gross income. These expenses include the premiums for insurance that covers the expenses of medical and dental care, and the amounts you pay for transportation for these purposes.Charitable ContributionsContributions can be of cash (includes check and credit card donations) or noncash items. If you donate clothes or furniture to a qualified charity, the value of those items may be deductible if they are in good used condition or better. Keep receipts from charity, noting the items donated as well as their fair market value when donated. Cash contributions, regardless of the amount, require a bank record or written confirmation from the charity.Your deduction for a car donated to a qualified organization is limited to the gross proceeds from its sale by the organization if the claimed value is more than $500. For a donation valued at more than $500, Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes issued by the charity must be attached to the tax return. Without the Form 1098-C, you cannot deduct your contribution. However, if the organization makes significant intervening use of, or materially improves the car, it will be marked on Form 1098-C and you generally can deduct its fair market value. Total noncash contributions over $500 require you to complete Section A of Form 8283, Noncash Charitable Contributions. Contributions of noncash items valued at over $5,000 require an appraisal and completion of Section B of Form 8283. Sales Tax and Personal Property TaxYou have the option of deducting your state sales tax or your state income tax. Which IRS deductions should you take? That's an easy one if you live in a state with no income tax or sales tax. If your state levies both, we will compare your state and local income tax to determine which is more beneficial for you. Be sure to take tax deductions on any personal property tax you paid on a car, boat or airplane.Legal ExpensesLegal fees such as for an adoption, divorce or property settlement are not deductible. However, legal fees to produce taxable income or to collect taxable income such as alimony or those related to doing or keeping your job are deductible as miscellaneous itemized deductions on Schedule A, subject to the 2% limit.EMPLOYMENT EXPENSES, FORM 2106 OR 2106-EZUn-reimbursed Employee ExpenseAn employee with business expenses that are not reimbursed or exceed the amount reimbursed by the employer can generally deduct them as miscellaneous tax deductions subject to the 2% adjusted gross income limit. Local Transportation Use Form 2106, Employee Business Expenses, or Form 2106-EZ, Unreimbursed Employee Business Expenses, to figure your deduction for employee business expenses. You can deduct the expenses that exceed 2% of your adjusted gross income. Depending on your employer’s reimbursement arrangement, special rules may apply. If a personal vehicle is used for business purposes, either a standard mileage rate or actual expenses can be claimed. Good written records are required. Uniforms and Work Clothes Work clothes and uniforms are deductible if they are required for your job and not suitable to wear outside the workplace. Protective gear such as hard hats and steel-toed boots qualify if necessary for your job. Work Related Educational Expenses You may be able to deduct work related educational expenses for education that: • Maintains or improves skills required in your present job or business, • Serves a business purpose and is required by your employer, or by law or regulation, to keep your salary, status or job. Your expenses are not deductible if the education is required to meet the minimum educational requirements of your job or is part of a program that will qualify you for a new trade or business. Expenses include tuition, books, supplies, and certain transportation or travel costs. |
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