Itemizing your deductions is a reliable method to reduce the taxes you owe the Internal Revenue Service. Each year, the IRS allows you to deduct the standard deduction from your adjusted gross income to allow for general living expenses. Having additional living expenses that exceed the standard deduction allows you to itemize, which will reduce your adjusted gross income significantly. The IRS allows you to deduct several types of expenses, including medical and dental expenses, job expenses and gifts to charity. To report these expenses on your income tax return, you must use Form 1040 and Schedule A. Depending on the expense you are deducting, the IRS might require you to complete an additional form that supports the deduction.
Medical and Dental Expenses
According to the IRS, you can deduct all medical and dental expenses that exceed 7.5 percent of your adjusted gross income. This deduction also includes expenses for your partner, children and any other person you claim as a dependent on your taxes. Deductible medical and dental expenses include any amount paid out of pocket for insurance premiums, prescriptions, medical specialists, diagnostic tests and examinations, hospital care, Medicare B and Part D premiums, stop-smoking programs, dental and vision care, medical aids, ambulance services, and lactation supplies. You can also write off a maximum of $50 per night per person for lodging costs when away from home for medical care. The IRS allows you to claim 23.5 cents per mile to travel for medical treatment. For more information on claimable expenses, refer to the Medical and Dental Expenses section of the Schedule A instructions.
Taxes You Paid
Certain state and local taxes you pay throughout the tax year are also deductible on your federal income taxes when you itemize your deductions. State and local taxes that you can deduct include state and local income tax paid, personal property tax, real estate taxes and general sales tax. The IRS allows you to claim either the state and local income tax deduction or the general sales tax deduction, not both. For more information on deducting taxes, refer to the Taxes You Paid section of the Schedule A instructions.
Paying interest throughout the tax year can have a significant impact on your income taxes. Interest that you can write off includes home mortgage interest, investment interest and mortgage insurance premiums. All home mortgage interest paid on your main or secondary home, including first and second mortgages and home equity loans, are deductible. According to the IRS, a home can be a house, cooperative, boat, mobile home, condominium or other similar property. The limit on the amount of deductible home mortgage interest depends on which year you acquired the mortgage. To calculate your investment interest deduction, you must complete and attach Form 4952. Refer to Publication 936 for more information.
Gifts to Charity
When you donate money or merchandise to a qualified charitable organization, the amount or fair market value of the item is deductible on your income taxes. The IRS imposes limits on the amount you can write off, to a maximum of 30 percent of your adjusted gross income. When planning to deduct charitable contributions on your taxes, you must keep all bank records, including a canceled check or statement from the charity. For a list of qualified charitable organizations and more information on deducting nonmonetary donations, refer to the IRS Publication 651 or the Schedule A instructions.
Casualty and Theft Loss
Casualty and theft loss can be detrimental to any family, even if the amount is minimal. The IRS allows you to deduct part of any loss caused by vandalism, theft, storm, fire or any other similar cause to your home, boat or car. The amount of each loss must exceed $100, and the total amount of all losses must exceed 10 percent (reduced by the $100 limit) of your adjusted gross income. To claim the casualty and theft loss deduction, you must complete Form 4684 and attach the form to your income tax return.
Job -Related Expenses
If you have any unreimbursed employee expenses, you can deduct part of these on your income taxes. The IRS imposes a limit to the deduction as any amount that exceeds 2 percent of your adjusted gross income. Unreimbursed employee expenses must be an ordinary or necessary expense for your business, profession or field of trade. Employee expenses include safety equipment, tools, uniforms, physical examinations, protective clothing and dues to chambers of commerce or professional organizations. Retain all receipts for the expenses and don't include any reimbursement you receive from your employer.
The last section of Schedule A allows you to enter and deduct certain miscellaneous expenses, which include tax preparation fees, certain legal fees, gambling losses, federal estate tax and amortizable bond premiums. For more information on how to claim miscellaneous deductions, refer to Publication 529.
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