Top Ten Overlooked Deductions
by AccountingWeb on
It's not too late! If you haven't filed your tax return yet, perhaps you can cash in on these most-frequently-overlooked deductions. Microsoft's MoneyCentral has summarized these potential tax savers:
- Pay off debt with a home equity loan. The interest on home equity loans is deductible whereas the interest on credit card debt is not.
- Contribute clothes and household items to charity. Take the time to take your unwanted items to a recognized charity, get a receipt, and save money on your tax return. Uncertain how to value these items? Check out the Salvation Army's Valuation Guide. Mileage driven for charitable purposes is deductible at 14 cents per mile.
- Bunch your deductions. Not enough medical or employee business expenses to qualify for a deduction this year? Try pushing year-end expenses into the next year, or prepaying next year's expenses at the end of the year in an effort to overload one year with enough expenses to qualify for an itemized deduction.
- Deduct job searching costs. Job search expenses such as recruiter fees, resume preparation, postage, costs to travel to interviews, and phone calls qualify as miscellaneous itemized deductions.
- Keep track of investment expenses. Certain investment-related expenses, including investment publications, investment advice, investment-tracking software, and computer usage, qualify for a miscellaneous itemized deduction.
- Deduct business supplies and gifts. You can take a miscellaneous itemized deduction for the unreimbursed cost of supplies you purchase for your job. Also, business gifts up to $25 per person qualify for a deduction.
- Deduct tax planning advice. If you pay for advice relating to planning for tax savings, that expense is a miscellaneous itemized deduction.
- Track your medical expenses. Medical expenses have a tendency to pile up, and if they pile up high enough (higher than 7.5 percent of your adjusted gross income), you may qualify for a deduction. Don’t forget to include medical supplies and equipment in addition to doctor, lab, hospital, and prescription charges. And keep track of your mileage to and from medical sites - the miles are deductible at 12 cents per mile.
- Medical services performed by a non-doctor are deductible. A health professional doesn't have to be a licensed doctor to provide a service that is deductible. It is recommended, however, that you obtain a letter from your doctor referring you to a person who performs health-related services.
- Hire your kids! If you are self-employed, consider hiring your children to help out in the family business. You get to deduct the wages, which the children report as income, and you are not liable for FICA and Medicare taxes on the children's wages. Pay your child as much as $6,400 and there is no income tax to the child.