DON’T OVERPAY UNCLE SAM
As April 17 approaches, you might be wondering, “What can I claim on my taxes when it comes to tax breaks or deductions?” Because every tax return is different, there’s no easy answer to this complicated question. However, there’s a long list of tax deductions that can reduce your taxable income, and you should take every one to which you’re entitled because overlooked tax deductions are wasted opportunities.
From child care costs to mortgage interest to charitable donations to moving expenses, the IRS offers a lengthy list of tax write-offs that can reduce your taxable income, so read carefully and decide which ones you can take.
MEDICAL AND DENTAL EXPENSES
You can deduct medical and dental expenses for you, your spouse and your dependents after your total medical expenses exceed 10 percent of your adjusted gross income. If you or your spouse is 65 or older, you can deduct total medical expenses that exceed 7.5 percent of your AGI.
TAX PREPARATION FEES
Whether you did your own taxes or paid someone to do them, you can include the fees on your miscellaneous tax deductions list. Costs can include tax return preparation and electronic filing fees. In order to qualify, however, the preparation fees must total more than 2 percent of your AGI.
HOME RENOVATION DEDUCTION
Typically, home renovation costs are not deductible on your tax return. However, if you make improvements to your home for medical purposes — such as adding entrance-and-exit wheelchair ramps or lowering cabinets for better accessibility — you can deduct those renovations as medical expenses. If the renovations increase the value of your home, however, you can’t claim them as medical-related expenses.
JOB SEARCH EXPENSES
If you itemize, you can deduct expenses you incurred during a job search, but you must have searched for the same line of work as your current or most recent job. Expenses you can deduct include: Transportation, which includes a deduction of 54 cents per mile, parking, tolls and cab feesPreparing, printing and mailing out your resumeFees related to job searchesEmployment agency fees
You can deduct some ordinary expenses you incur from a hobby. Unlike a business, a hobby is an endeavor from which you do not expect to profit. If you suffer losses due to a hobby, you cannot deduct the loss from your income.
STATE AND LOCAL SALES TAX
Taxpayers have the option of deducting either the state and local income taxes or state and local general sales taxes they paid during the tax year, but not both. If you live in a state with no income tax, consider deducting state and local sales taxes you paid.
STATE, LOCAL AND FOREIGN TAXES
You can claim certain taxes imposed on you as itemized deductions. Apart from state and local sales tax, you can also deduct: Local and state personal property taxesForeign, local and state real estate taxesForeign, local and state income taxes
STATE BALANCE DUE
If you owed additional taxes on a prior year’s state return and paid them in 2016, you might be able to deduct the taxes you paid.
JURY DUTY PAY
If you gave your jury pay to your employer because he continued to pay your salary while you served on the jury, you can deduct your jury pay from your taxable income.
EARLY WITHDRAWAL PENALTY
If you withdrew your money early from a certificate of deposit, IRA or similar account or investment, the penalty you paid could qualify as a tax deduction, even if you don’t itemize deductions on your 1040.
BAD DEBT DEDUCTION
If you lent money that you never got back, it is considered a bad debt, which might make you eligible for a tax rebate. Generally, to deduct a bad debt, you must have previously included the amount in your income or loaned out your cash. You must also show that you attempted to collect the debt and that there’s no chance you’ll be able to recoup it.
If you meet the IRS distance and time tests after you relocate for a new job, you can take a moving-expense deduction. Qualified expenses include the cost of moving your belongings and traveling to your new home, and the standard rate is 19 cents per mile. You can also deduct the cost of lodging, but not meals, for yourself and other household members.
MORTGAGE INSURANCE PREMIUMS DEDUCTION
If you obtained a mortgage insurance policy in 2007 or later, you might qualify for a deduction on the amount you’ve paid toward the premiums. As part of the Protecting Americans from Tax Hikes Act, qualified mortgage insurance will be treated as tax-deductible interest through the end of 2016.
MORTGAGE INTEREST DEDUCTION
Most taxpayers who itemize are eligible to deduct the interest they paid on their mortgages. You can deduct the interest you paid on loans of $1 million or less, but if you’re married and filing separately, you can deduct only the interest on loans of up to $500,000.
If you itemize, you can deduct the points — or prepaid interest — you paid to purchase or build your primary home. Generally, if you can deduct all the interest you paid on your mortgage, you can also deduct all of the points.
You cannot deduct appraisal fees if they went toward the purchase of a home. You can deduct them as a miscellaneous itemized deduction, however, if the property was donated, but only if the fees totaled more than 2 percent of your AGI.
If you sold your home at a profit, you can exclude up to $250,000 — or $500,000 for married couples filing jointly — of gains from your income.
SELF EMPLOYED HEALTH INSURANCE
Health insurance is tax-deductible for self-employed taxpayers. If you were self-employed in 2016, you can deduct premiums you paid for medical and dental insurance, as well as for qualified, long-term care insurance.
Source: MSN Money