10 Most Overlooked Tax Deductions

Posted on February 5, 2009
Filed Under Deductions | 1 Comment

Through deductions, American wage earners have the chance to pocket more income, rather than hand over their hard-earned cash to the government. For those who keep good records, deductions can mean more money - and less for the IRS. You probably know the most common deductions, such as deductions for property taxes and charitable donations, but there are related deductions you might be overlooking. Read on for some of the common fees and expenses you can deduct to reduce your tax bill.

The Deductions Caveat
Some of the deductions listed here fall under the label of miscellaneous deductions, and they are below the line - that is, you take the deductions after you’ve calculated your adjusted gross income (AGI). To cash in, you must itemize deductions on Schedule A of your federal return rather than take the standard deduction. The sum of all of your miscellaneous deductions must be more than 2% of your AGI; therefore, if your AGI is $50,000, all of your miscellaneous deductions must top $1,000. The kicker, of course, is that you can deduct only the amount that exceeds 2% (that is, the amount above and beyond $1,000).

Selling Your Home, Sweet Home
Owning a home can give you hefty tax write-offs each year, from deductions on points paid when you bought the home to deductions on mortgage interest and property taxes while you lived in it. When you sell your home, though, you also get some tax benefits: you can deduct the fees you incur to unload your home. You can still deduct a portion of the property taxes you paid while you lived in the home, and you get to deduct the commission you paid to your real estate agent and any fees you paid at closing.

Driving Home a Tax Break
You pay a sales tax on a new car when you buy it and then some states continue to tax you each year for, as the state of Kentucky puts it, “the privilege of using a motor vehicle upon the public highways.” States with vehicle taxes as of 2009 include Colorado, Kansas, Kentucky, Nebraska, Nevada, New Hampshire, South Carolina, Texas and Virginia.

Most states send out a notice to demand their tax payment to register your car each year. After you slap your new decal on your car, file away the receipt and add that payment to your deductions for personal property taxes in April.

Fees for a Worthy Cause
You donated your skinny jeans and your wagon-wheel coffee table to Goodwill and reduced your taxes by increasing your miscellaneous deductions, but you can fatten the sum of your miscellaneous deductions when you remember to include associated fees, such as appraisal fees, for the big-ticket items you donate.

The IRS requires that you provide “a qualified appraisal of the item with the return” when you donate an item worth more than $500. For items like electronics, appliances and furniture, you need to pay a professional to assess the value of your donation; that fee for service is deductible.

Free Rides for Charity
If you’re the type of person who likes to donate your free time to volunteer in your community and you dip into your own wallet to get to your favorite charity, you can add those expenses to your miscellaneous deductions. Whether you ride the bus or drive your own car, keep good records of your charitable activities and keep receipts for public transportation or mileage logs for your car (for which you can charge the standard mileage rate for charitable organizations), as well as receipts for parking and tolls.

Washing Away Tax Liability
It’s easy to remember to deduct the cost of plane tickets and hotels when you travel for business, but you’ve got to look snappy when you’re networking out of town, and that often means sending suits to the cleaner. Hang on to laundering receipts and you can clean up when the total pushes you over the 2% limit for miscellaneous deductions.

Shipping Out Savings
The IRS understands that you can’t lug all your work with you when you travel. Sometimes you have to ship documents, displays, or even baggage ahead of time. You are allowed a write-off for shipping and baggage costs as part of your miscellaneous deductions, and because some airlines up the ante of travel by charging you to check your bags, this tax write-off eases the burden of getting your stuff from Point A to Point B. Don’t shove that baggage receipt in a coat pocket and forget about it - keep it with your business documents and file it away for April.

Networking for Cash
The business of doing business as you travel means calls to connect with contacts, faxes to confirm orders and internet access to research information. When you pay a surcharge to stay connected, such as for hotel phone calls or coffee shop internet access, count that fee toward your miscellaneous deductions. Make sure to get itemized bills from your hotel and receipts of your networking transactions so you have solid records. And no, you can’t charge for the vanilla latte that kept you awake through your boss’s lengthy emails.

Getting Fit Gives Deductions a Leg Up
Staying healthy can cost you an arm and a leg; therefore, the IRS allows you a deduction specifically for medical expenses, but only for the portion of expenses over 7.5% of your AGI. Thus, if your AGI is $50,000 you can deduct the portion of your medical expenses over $3,750. If your insurance company reimburses you for any part of your expenses, that amount cannot be deducted.

According to the National Coalition on Healthcare, in 2007 the average individual paid $4,400 just for insurance premiums, and the average family of four paid $12,000. Therefore, if you’re an individual making $50,000 you could deduct $650, the amount of the premium that exceeds the 7.5% limit. (Remember, you can’t deduct your premiums if you buy coverage through a payroll deduction using pretax dollars - in that case you’ve already earned your tax savings.)

A portion of money you pay for long-term care insurance can also ease your tax burden. Long-term care insurance is a deductible medical expense, and the IRS lets you deduct an increasing portion of your premium as you get older.

There’s another often-overlooked benefit when you visit your doc: you can deduct the cost of transportation to obtain medical care, which means you can write off the expense of taking the bus, car expenses (the standard mileage deduction for medical purposes), tolls and parking.

You can also deduct any additional copayments, prescription drugs, lab fees and more as part of your medical expenses - if your total expenses exceed the 7.5% limit. The IRS also allows you to factor in common fees and services if they are not fully covered by your insurance plan, such as therapy and nursing services. In fact, the IRS’ definition of medical expenses is fairly broad and can even include such items as acupuncture and smoking-cessation programs.

Conclusion
The slips of paper you cram into your wallet can mean more money in your bank account come tax season. Hold on to receipts for services, and keep a file throughout the year so you have a record of even the smallest expenses you incur for business, for charity and for your health. As those expenses add up, they can start to lower your tax bill.

Improved Child Tax Credit Introduced in U.S. Senate

Posted on December 16, 2008
Filed Under News | Leave a Comment

Senators Max Baucus and Harry Reid have introduced a tax extenders bill that would lower the income level to qualify for the federal Child Tax Credit (CTC) from the current $12,050 to $8,500, the same amount as in a House-passed bill. The Child Tax Credit is a credit of up to $1,000 to help families with the costs of raising a child. Under current law, the CTC is not properly indexed for inflation. As a result, many low-income families will become ineligible to receive the CTC unless Congress adjusts the eligibility threshold. Under the Senate bill, 34,848 Minnesota children would become eligible for the CTC and 120,715 children would receive a larger credit.

Congress is expected to vote on a final bill in September. The Center on Budget and Policy Priorities has a good issue brief if you want to read more about the CTC.

-Steve Francisco

Taxbreak During a Recession

Posted on December 13, 2008
Filed Under News | Leave a Comment

the system and all is well.  I heard a report on the radio today that there is a Republican Congressman who is proposing they take the 350 Billion left from the Bailout Package and give the American People a “Tax Holiday”. I have just confirmed the story

Apparently, Louis Gohmert, Jr. (R-TX) is a rank-and-file Republican has put together legislation that will indeed give all U.S. Citizens a 2 month moratorium on Federal Income Tax and FICA. It is roughly 25% of most peoples salary. This would amount to about $322 Billion over the course of the 2 months. Rep. Gohmert has only been in Washington since 2004, apparently not long enough to be indentured to anyone but his charges in District 1 of Texas. History proves that tax cuts are the sure way to bolster a failing economy.
For the first time, the people being rewarded are not going to spend the money on corporate retreats, buying new ventures or flying their personal jet to church on Sunday.
Gohmert’s plan does not currently include corporations, though if the employees did not have to pay the taxes, the corporations would get a break as well. The plan is apparently limited to individual tax payers. Gohmert’s premise was that the individual taxpayers “always do better with their own money than the government does.” He said “It would be so much more valuable to the economy than having one person who’s been wrong on just about everything they’ve predicted or said having that much power.”
While this is all great news, the bill needs to make it to the floor and there have already been murmurings that Scary Pelosi won’t let it hit the floor. I think the best thing we as tax payers can do to make sure we get our taxes back is call… not e-mail… call every representative we can get a hold of tomorrow. (Certainly call Nancy Pelosi)  Clog the phones so that they know we are aware of the plan… and we are watching to see what they are going to do with OUR money.  If you need to get the contact information for your Representatives, you can find all of the information by your zip code at www.Govtrack.us .

If you would like to call Nancy Pelosi’s offices to make sure she understands that we know about the legislation, you can call her CA office at (415) 556-4862 or her Washington, DC office at (202) 225-4965 or both if you really feel strongly about it.  I just did.

Source: www.HumanEvents.com

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