Top 10 Deductions Commonly Missed
Check these deductions to see if any might apply to you.
Have you thought about your taxes after you submitted them and realized you missed something you could have deducted?
This happens to most people. There are many distractions and complicated processes involved with completing your taxes correctly and on time. This leads to oversights on many items that you can legally deduct on your taxes. We have compiled a list of items that are commonly missed. Take a look at this list before you submit your taxes and you could save yourself some expense in taxes or increase your return.
If you are a kindergarten through 12th grad teacher, teacher's aide, instructor, or principal, you are eligible for a deduction for up to $250 for any out-of-pocket expenses you purchased. If you bought books, supplies, computers, training materials, etc. for your job. If you are like most teachers, this is the norm, rather than the exception. (thank you to all you teachers out there!)
Premiums on Health Insurance
Health Insurance or long-term-care premiums (based on your age) are eligible for deductions. However there is a catch. You must total up all of your medical expenses and if they exceed 7.5% of your "adjusted gross income" you can then receive a tax benefit.
If you are self employed, you can deduct 100% of your health insurance premiums not covered by your company. These can be taken off "above the line" which means that they are removed from your adjusted gross income and not mixed up in your itemized deductions. These types of expenses don't need to meet the 7.5% of your "adjusted gross income" rule.
Home Improvement for Energy Savings
Did you spend some money last year to help conserve energy in some way? This could include solar panels, solar water heaters, high-efficiency heaters or furnaces, water heaters, skylights, outside doors, special paint on roofs, or even new air-conditioning units that are used for your primary residence. If so, you are eligible to receive a dollar-for-dollar reduction in your tax at 30% of your cost for these items. The credit is capped at $1,500, but that is still $1,500 you don't need to pay in taxes. And, you just saved yourself a bunch of money for these improvements as well.
Old Points on Refinancing
This is confusing for most people and many miss this deduction. If you refinanced your house this year, your old points may be eligible for deductions in the year you refinanced. So here is a scenario, if you refinanced on July 1st, 2008, and paid $2500 in points. You refinance again in May of 2009. You can deduct all the remaining points on the 2008 loan on your 2009 tax return. This adds up to around $2,380 you can deduct for January through June 2009. This applies if you refinance in 2009 and re-finance in 2010.
New Points on Refinancing
If you are one of the thousands of people who refinanced their home in 2009 or 2010, you may be able to write of some of the costs for the points on this refinance. You can deduct the points you paid on a monthly basis over the life of your new loan. So if you refinanced your mortgage in July, 2009 for a 20 year term, six out of the 240 months will have passed after Dec 31st, 2009. If you paid $2,500 in points , yo;u can write off about $60 ($10/month for six months) for 2009. Then in 2010, you can deduct $120 and so on until the points are paid written off in full. This isn't a lot to write off, but it's still $120 you don't need to pay.
Many people do their spring cleaning and give away unneeded items to charities such as Deseret Industries, Goodwill, the Salvation Army, or other organizations that collect these items, clean or repair them and sell them for charity purposes. Get a receipt from them for the current value of the donation. These companies are used to giving these receipts away, and they can add up quickly. The rule is no receipt, no deduction. However, if you made the donation at night or in a drop-box and didn't get a receipt, go ahead and take the deduction anyway. You legitimately made the contribution. If you get audited, you may not be able to prove it, but you can take a chance and play the audit lottery. You are still an honest person and may just need to remove this item if you are audited.
Note: Ebay or Craig's List is a great place to find the current market value of an item. Find the item there and print this out with the date for your records.
This is one most people never think about. Last year there were hundreds of forrest fires, floods, hurricanes, floods, snow storms, etc. If the president declared your area a "disaster area" you can claim your loss on your 2008 or 209 return.
Tax and Investment Expenses
Tax preparation, tax planning and investment planning are all deductible as part of your itemized expenses. However, their total must exceed 2% of your "adjusted gross income" before you can claim these tax benefits. The items you can take into account include:
- Employee business expenses
- Tax preparation fees
- Accounting fees
- Legal fees
- Tax planning fees
- Investment Planning fees
- Estate planning fees
- Safety deposit box fees
- Annual fees paid to your broker
- IRA fees you pay directly
- Publications or subscriptions to professional magazines (such as Forbes, BusinessWeek, Fortune, etc)
- Investment newspapers
- Long distance costs you incur to brokers or advisors
- Mileage you use to visit these professionals
Retirement Tax Credit
This is a credit that has been designed to help moderate to low-income tax payers save for their retirement. If you make a contribution to your retirement account, that money is not currently taxed. So this is a double positive because you can still write this off in addition to this. In addition to this, you get a credit of as much as 50% of the first $2,000 you invest. Here is another $1,000 you can reduce your taxes by.
We hope this is helpful to you who are wading through the process of yet another year's tax preparation and submission to the State and Federal governments.
- Tags: Tax Deductions