One of the crucial choices you make when preparing your federal income tax return is whether to itemize your deductions or accept the standard deduction. If your itemized deductions add up to a larger sum than the standard deduction you qualify for, you’re probably better off itemizing your deductions. You may claim a wide range of itemized tax deductions on Tax Form 1040 in the Schedule A section. Be prepared to include additional forms or documentation if your accountant suggests it.
Write Off Dental Costs
Many people put off going to the dentist because of the large out-of-pocket costs that can quickly add up even with dental insurance. However, dental expenses that are more than 10 percent of your annual adjustable gross income may be listed as an itemized deduction on your taxes. You may also deduct dental care costs for your spouse and other dependents. Eligible dental expenses include the costs of x-rays, diagnosis, procedures to treat dental problems or diseases and preventative care, such as cleanings and exams.
Itemize Medical Expenses
Medical expenses that add up to more than 10 percent of your adjusted gross income for the year may also be deducted. The costs of going to the doctor, a specialist or the hospital can leave you with little money for other things, and this tax deduction can help you avoid being unfairly taxed on those basic, necessary expenses. Preventative care, surgeries and treatments for illnesses and injuries are included. Regular visits to psychologists and psychiatrists also can be deducted as tax write-offs. Prescription medicines, hearing aids and eyeglasses are also deductible. If you need to travel for medical care, parking fees, bus fare or car mileage can be written off. When you choose to itemize your tax deductions, it’s okay to deduct medical expenses for you, your spouse and all dependents.
Contributions to Charity
Do you love to support your local church or animal welfare organization? There’s good news. The money you spend on donations to non-profit organizations is likely eligible as deductions when you’re itemizing them on your taxes. That can present a win-win situation. You can donate to organizations you think are truly worthwhile while reducing your tax burden. Donations you make to help individuals with a medical or financial emergency through an online fundraising page probably won’t qualify.
Not every organization that claims to be a charity may qualify. Only donations to qualified non-profit organizations are deductible. It’s okay to search the IRS Exempt Organizations Select Check or ask to see a charity’s letter from the Internal Revenue Service. Many charities will post their letter on their website, so you won’t even have to ask.
Financial contributions are not the only way you can get an itemized tax deduction for a charitable donation. You may also deduct the fair market value of items that you donate to charity. From clothes that are donated to a local charity and resale in a second shop to a car that’s donated for a good cause, physical goods that are donated may be deductible. Also, you might be able to deduct out-of-pocket expenses for your volunteer work with a charity. You cannot put a value on your time and deduct it, but necessary travel expenses for your volunteer work with a charity may be deducted.
Get a receipt for all donations you make to charitable organizations. Even if you make a cash donation, you can get a receipt. Also, look at payroll deductions. Many employers offer to match regular employee charitable contributions that are deducted from employees’ paychecks, and your only receipt for these deductions may be on your paycheck.
Deduct Home Mortgage Points
Deduct your home mortgage points in full for the year you pay them as long as your primary residence secures your loan.
Paying points is the established practice in the area where you took out the loan, and you use your mortgage loan to build or purchase your main home. The points that you paid shouldn’t exceed the amount that’s charged for the area generally. Also, the points that were paid shouldn’t be for items, such as attorney fees and title fees, that are listed separately on a settlement sheet. The amount should be clearly shown as points on your settlement statement. The funds you paid at or before closing should be at least as much as the points charged.
Points that are paid on a home improvement loan for your primary residence are also fully deductible in many situations. Talk to your accountant about your unique situation to be sure your points qualify. If your points don’t qualify to be fully deducted, they may be deducted during the duration of the loan. Points that are paid for refinancing your primary residence may also be deducted over the life of your new mortgage.
Claim Work-Related Expenses
When you itemize your taxes, you may list work-related expenses as deductions. You can include a wide variety of things related to your employment. If you buy uniforms for your work, you may deduct the costs of your uniforms. Similarly, if you use small tools and supplied to complete your job, you can deduct those costs. Union and professional dues are tax write-offs, too.
Types of Deductible Taxes
List state, local and foreign real estate taxes as part of your itemized deductions. State and local personal property taxes are deductible, too. Choose between deducting state and local sales taxes or state and local income taxes. You cannot deduct both types of state and local taxes. However, choosing between income and sales taxes is easy in states like Alaska and Florida, which do not have a state income tax.
A vehicle sales tax deduction can be taken if you didn’t claim your state income tax. Only the local and state sales tax on it can be deducted. Save the sales receipts to show the exact sales taxes that were paid. Alternately, access the IRS sales tax tables to determine your eligible deduction on the purchase.
Theft, Casualty and Disaster Losses
Certain theft, casualty and disaster losses may also be deducted when you’re itemizing your tax deductions. These losses are costs that aren’t going to be reimbursed by your insurance company. Casualty and theft losses on your house, vehicles and significant household items are eligible typically. If you are in a federally declared disaster area, those losses are fittingly called disaster area losses. Eligible theft losses occur when someone takes or removes your money or property illegally. Casualty losses occur when your property sustains damage or destruction because of a sudden, unusual or unexpected event. These events may include earthquakes, floods, hurricanes, fires, tornadoes or volcanic eruptions.
New Rules for Moving Expenses
Prior to 2018, you could deduct moving expenses that were necessary for work. As of 2018, moving expenses may only be deducted by military members under certain circumstances. Members of the U.S. Armed Forces who are on active duty and move because of a permanent change of station may deduct eligible moving expenses.
Various Other Tax Deductions
Miscellaneous expenses that don’t fit in the other criteria may still be deducted. Miscellaneous itemized deductions can be taken when they exceed 2 percent of your annual adjusted gross income. Tax preparation fees may be deducted whether that includes tax filing fees or the expenses of a tax preparation software program. You may also get tax breaks on a variety of unreimbursed employee expenses.
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