As many are preparing to file their annual tax returns, this week we focus on ways to reduce your tax liability. The Internal Revenue Service collects federal income tax and establishes laws regarding tax payment and allowable deductions. If certain conditions are met, then you are allowed to deduct certain expenses from your taxes, providing the opportunity to considerably lower your tax liability. Below are some uncommon and often-missed income tax deductions:
Medical-Related Tax Deductions
- Health insurance premiums including some long-term care premiums
- Medical transportation expenses including tolls, parking, and mileage for trips to health facilities, doctor’s offices, laboratories, etc.
- Medical aids such as crutches, canes, and orthopedic shoes
- Hearing aids, eye glasses, and contact lenses
- Hospital fees for services such as nursing, physical therapy, lab tests, and x-rays
- Self-employed health insurance premium
NOTE: Medical expenses have to exceed 7.5% of your adjusted gross income before any tax benefit is granted. If self-employed and not covered by an employer-paid plan, you can deduct 100% your health insurance premiums (to the extent of your net income).
Job-Related Tax Deductions
- Education expenses you paid to maintain or improve job skills
- Professional journals, magazines, and newspapers that are job-related
- Cost of safe deposit box used for investments or business
- Required uniforms and work clothes (not eligible if suitable for street wear)
- Employment and professional organization union dues
- Home office expenses, if for your primary place of business
- Job-seeking expenses within your present field of employment
- Business expenses including travel, meals, lodging, and entertainment not reimbursed by your employer
- Cellular phones required for business
- Half of the self-employment tax paid
Property-Related Tax Deductions
- Points paid to refinance home
- Commission paid to brokers or agents for the sale of property or property management
- Moving expenses
- Personal property taxes on automobiles and boats
- General casualty and theft losses in excess of $100 and totaling more than 10% of adjusted gross income
Other Tax Deductions
- Tax preparation or advice fees
- Alimony (not child support) paid
- Student loan interest
- Transportation costs when volunteer for some non-profit organizations
- Non-cash charitable contribution (such as furniture, clothes, car, household goods) donated to charity. Always get a written receipt.
Final thought… The list above is not complete for all possible deductions. We wanted to educate you on those uncommon and often-missed tax deductions because tax deductions ultimately work in your favor by decreasing the amount of money used in calculating the tax due. There are different criteria to take advantage of some deductions. Be sure to mention those deductions listed above that you may qualify for to your tax preparer. You do not want to miss any deductions.
Remember our goal is to get Financial F.I.T. (Focused, Involved to Transform your life).
Until next week,