Overlooked Deductions

Overlooked Deductions

Forty Easily Overlooked Deductions

Expenses for everything from contact lenses to dry cleaning could help you lower your tax bill. IRS regulations allow many personal and business expenses to be deducted from your gross income before you figure your tax liability. The more you can substract , the more you reduce the amount of your taxable income. Here’s a list from Ernst & Young, one of the nation’s largest accounting firms, of 40 deductions that are easily overlooked.

1. Apprisal Fees: When paid to determine value of a charitable gift or extent of a casualty loss.

2. Breach of Employment: An employee who paid damages because he or she broke a contract can deduct the damages.

3. Business Gifts: No more than a certain amount to any one person per year.

4. Casualty Loss: An unreimbursed loss exceeding $100 is deductible when the loss exceeds 10 percent of your adjusted gross income. This also applies to losses from theft.

5. Cellular Telephone: When used in your business, or required by your employer, the cost of the phone may be deductible, plus phone calls made.

6. Charitable Expenses for Volunteer: Twelve cents a mile for use of your car, plus out-of-pocket spending for such items as uniforms and supplies, but the value of your time is not deductible.

7. Commission on Sale of Assets: Brokerage or other fees to complete a sale are taken into acount when you figure your profit or loss, generally by being added to your cost for the asset.

8. Contact lenses: You can also include the cost of eyeglasses or cleaning solution.

9. Contraceptives: Prescriptions, including birth control pills, are legitimate medical items. So, too, are abortions.

10. Contributions to Public Parks: Help funding a park or recreation site can qualify as a charitable gift.

Overlooked deductions can help buy a new dress. Photo by Elena

11. Disabled Person’s Job Expenses: A normal commute isn’t deductible, but getting to a job for occupational therapy is deductible as medically related transportation.

12. Drug and Alcohol Abuse Treatment: Includes measls and lodging when staying at a treatment center, but not programs to quit smoking.

13. Educational Expenses: To improve or keep up your skills at your current job, but not to prepare for a new occupation.

14. Employment Agency Fees: Whether you get a new job or not; but not if you’re looking for your first job or switching occupations. Résumé and travel costs also are deductible.

15. Foreign Tax: If you pay tax to another country on income from foreign investments, you can get a deduction or credit for those payments when figuring your US tax.

16. Gambling Losses: Only up to the amount of reported winnings.

17. Guide Dog: For the blind or severely impaired. Include dog’s food, care.

18. Hearing Aids: Includes batteries.

19. Home Computer Depreciation: If it’s used in your business or to manage investments, or if your employer requires you to have it.

20. IRA Trustee’s Fees: Administrative charges (but not brokerage commissions) when billed and paid separately. But not when taken from the IRA balance.

21. Labor Union Dues: Deductible by members and by workers required to pay dues though not union members.

22. Laundry Service On a Business Trip: You needn’t pack for an entire trip.

23. Moving Expenses: When changing jobs or starting work for the first time. To be eligible, new job must mean a 50-mile or longer extra commute if you don’t move.

24. Premium on Taxable Bonds: Investors who buy taxable bonds for more than face value can gradually deduct the excess each year they own the bond.

25. Medical Transportation: If driving, you can claim nine cents per mile plus tolls and parking.

26. Mortgage Prepayment Penalty: Charge for early mortgage payoff is deductable.

27. Orthopedic Shoes: The extra amount over the cost of normal shoes.

28. Penalty for Early Withdrawl of Savings: When a certificate of deposite is cashed in before maturity a penalty is deductible as an adjustment to income.

29. Personal Property Tax on Cars: Include licensing fees when based on the value of the car.

30. Points on a Home Mortgage: Deductible as a lump sum when paid on a loan to buy or remdoel a main residence, deductible gradually over the life of the loan when paid to refinance a mortgage.

31. Property Tax After Real Estate Is Sold: Buyers and Sellers must allocate a year’s tax, so a buyer can get a deduction for the part of the year after a sale even though the seller paid the property tax.

32. Safe-Deposit Rental: When box stores stock certificates or other taxable investment documents.

33. Self-Employment Tax: Adjustment allows those who work for themselves to reduce taxable income by half their self-employment Social Security and Medicare tax.

34. Special Schooling: For the mentally or physically impaired to help them deal with their disability, even though the day included regular education. Meals and lodging may also be deductible.

35. State Disability Fund Payments: California, New Jersey, New York, Rhode Island, Washington State, Alabama, West Viriginia and other states’ workers can deduct mandatory payments to disability and unemployment funds as state income tax.

36. Support for a Visiting Student: Up to a certain amount per month in housing, food, and support for live-in exchange student is deductible, as long as you receive no reimbursement.

37. Tax Preparation: Accountant’s fees, legal expenses, tax guides, and computer programs.

38. Uniforms and Work Clothes: When required for work, but not suitable for ordinary wear.

39. Wig: When is essential to mental health, but not when used only to enhance appearance.

40. Worthless stock: Claimed as a capital loss in the year it first has no value (Less than one cent per share generally is considered worthless).

Note: Some deductions are limited. For earnings, only the portion of tota medical expenses exceeding 7.5 percent of of your adjusted gross income is deductible. « Miscellaneous » deductions, including most employment-related and investment expenses, are deductible only to the extent they exceed 2 percent of adjusted gross income.