The Seven Deadly Tax Sins: Commonly Missed Deductions
It’s that time again, the tax deadline of April 15 looming. If you’re like most people, you haven’t gathered all of your tax records, much less filed your return.
Before we dive in and get started, take this opportunity to first review a list of some tax deductions that you may be entitled to if you itemize deductions but are overlooked by most people. Many of these deductions are subject to various limitations, so consider getting professional help from your tax advisor and accountant to determine which deductions you qualify for and which items apply to your specific circumstances. Remember, there are hundreds of deductions in all tax laws; many of them can be quite obscure but also quite lucrative. Here are seven commonly missed deductions to consider:
- Points about refinancing: With interest rates so low in 2003, there was a lot of refinancing activity. The points you pay to refinance your home can be deducted pro rata over the life of the new loan. Also, all unamortized points from the old refinance are deducted in the year of the new refinance.
- Health Insurance Premiums – All health insurance premiums you pay, including some long-term care premiums based on your age, are potentially deductible. Medical expenses must reach 7.5% of your adjusted gross income before they can grant you any tax benefits. The self-employed can deduct 100% of the health insurance premiums paid by themselves, their spouses and their dependents.
- Non-Cash Charitable Contributions – If you’ve used your credit card for charitable contributions, remember that the deduction is allowed in the year you charged, not when you actually pay the bill. In addition, you can cancel certain out-of-pocket expenses related to charitable activities. Appraisal fees paid to value property donated to charities may be taken as a miscellaneous deduction subject to the 2% floor on miscellaneous deductions.
- Higher Education Expenses – If your adjusted gross income was not more than $ 65,000 ($ 130,000 for married filing jointly) in 2003, you can get a deduction above the line of up to $ 3,000 for any higher education. tuition fees and fees you paid. For 2004, the deduction can be up to $ 4,000. For those with higher adjusted gross income limits ($ 80,000 single, $ 160,000 married filing jointly), the deduction is limited to $ 2,000 for 2004. This deduction must be coordinated with other education credits and savings vehicles.
- Work Related Expenses – You can write off many work related and job search expenses such as education that maintains or enhances your skills, certain business tools, union dues, cell phone depreciation, certain job search expenses in your occupation current, including employment agency fees, resume preparation and travel expenses (local and out of town) and cleaning and laundry bills during a business trip. Work-related expenses are subject to the 2% floor on miscellaneous deductions. Also, if you buy a new SUV for business use that weighs more than 6,000 pounds and file Schedule C or other business tax return, you may be allowed to write off the full amount (up to $ 102,000 in 2004) in one year as a business. . Expenses subject to limitations.
- Clean Fuel Deduction: If you’re not in the market for a large business SUV, you can still get a deduction for your personal car, another deduction above the line of up to $ 2,000 for 2003 ($ 1,500 for 2004) from the cost of buy a clean fuel vehicle or a car that uses a significant source of energy other than gasoline. That includes hybrid cars, like the Toyota Prius, the Honda Insight, and the Honda Civic Hybrid. You get the deduction in the year you start using the car and you must be the original owner.
- Investment expenses and taxes: In addition to forgetting to deduct tax preparation fees and the part of their legal, accounting, or financial planning fees that relate to tax planning, many people do not deduct investment expenses. Those include certain fees paid to your financial advisor and / or broker and certain IRA fees that you can pay directly. You can also include mileage for meetings and long distance phone calls to your advisor or broker. Do not forget to include deductions for the cost of your investment publications or subscriptions, safes used for investment related documents, these deductions are subject to the 2% floor on miscellaneous deductions.