You probably know the most common deductions, such as deductions for property taxes and charitable donations, but there are related deductions you might be overlooking. Read on for some of the common fees and expenses you can deduct to reduce your tax bill.
Tax Deductible Donation Laws
Fees for a Worthy Cause
You donated your skinny jeans and your wagon-wheel coffee table to Goodwill and reduced your taxes by increasing your miscellaneous deductions, but you can fatten the sum of your miscellaneous deductions when you remember to include associated fees, such as appraisal fees, for the big-ticket items you donate.
The IRS requires that you provide "a qualified appraisal of the item with the return" when you donate an item worth more than $500. For items like electronics, appliances and furniture, you need to pay a professional to assess the value of your donation; that fee for service is deductible. (For more on charitable contributions, see It Is Better To Give AND Receive.)
Free Rides for Charity
If you're the type of person who likes to donate your free time to volunteer in your community and you dip into your own wallet to get to your favorite charity, you can add those expenses to your miscellaneous deductions. Whether you ride the bus or drive your own car, keep good records of your charitable activities and keep receipts for public transportation or mileage logs for your car (for which you can charge the standard mileage rate for charitable organizations), as well as receipts for parking and tolls.
Getting Fit Gives Deductions a Leg Up
Staying healthy can cost you an arm and a leg; therefore, the IRS allows you a deduction specifically for medical expenses, but only for the portion of expenses over 7.5% of your AGI. Thus, if your AGI is $50,000 you can deduct the portion of your medical expenses over $3,750. If your insurance company reimburses you for any part of your expenses, that amount cannot be deducted. (Read about how to reduce your healthcare expenses in 20 Ways To Save On Medical Bills.)
According to the National Coalition on Healthcare, in 2009 the average premium for employee-only coverage was $4,824 just for insurance, and the average family of four was $13,375. Employees paid an average of 17% of the cost for single coverage and families paid an average of 27%. If you're an individual making $50,000 you could deduct $650, the amount of the premium that exceeds the 7.5% limit. (Remember, you can't deduct your premiums if you buy coverage through a payroll deduction using pretax dollars - in that case you've already earned your tax savings.) (For related reading, see Buying Private Health Insurance.)
A portion of money you pay for long-term care insurance can also ease your tax burden. Long-term care insurance is a deductible medical expense, and the IRS lets you deduct an increasing portion of your premium as you get older as long as the insurance is not subsidized by your employer or your spouse’s employer.
There's another often-overlooked benefit when you visit your doc: you can deduct the cost of transportation to obtain medical care, which means you can write off the expense of taking the bus, car expenses (the standard mileage deduction for medical purposes), tolls and parking.
You can also deduct any additional copayments, prescription drugs, lab fees and more as part of your medical expenses - if your total expenses exceed the 7.5% limit. The IRS also allows you to factor in common fees and services if they are not fully covered by your insurance plan, such as therapy and nursing services. In fact, the IRS' definition of medical expenses is fairly broad and can even include such items as acupuncture and smoking-cessation programs.
(REFERENCE: 10 Most Overlooked Tax Deductions)
Fees for a Worthy Cause
You donated your skinny jeans and your wagon-wheel coffee table to Goodwill and reduced your taxes by increasing your miscellaneous deductions, but you can fatten the sum of your miscellaneous deductions when you remember to include associated fees, such as appraisal fees, for the big-ticket items you donate.
The IRS requires that you provide "a qualified appraisal of the item with the return" when you donate an item worth more than $500. For items like electronics, appliances and furniture, you need to pay a professional to assess the value of your donation; that fee for service is deductible. (For more on charitable contributions, see It Is Better To Give AND Receive.)
Free Rides for Charity
If you're the type of person who likes to donate your free time to volunteer in your community and you dip into your own wallet to get to your favorite charity, you can add those expenses to your miscellaneous deductions. Whether you ride the bus or drive your own car, keep good records of your charitable activities and keep receipts for public transportation or mileage logs for your car (for which you can charge the standard mileage rate for charitable organizations), as well as receipts for parking and tolls.
Getting Fit Gives Deductions a Leg Up
Staying healthy can cost you an arm and a leg; therefore, the IRS allows you a deduction specifically for medical expenses, but only for the portion of expenses over 7.5% of your AGI. Thus, if your AGI is $50,000 you can deduct the portion of your medical expenses over $3,750. If your insurance company reimburses you for any part of your expenses, that amount cannot be deducted. (Read about how to reduce your healthcare expenses in 20 Ways To Save On Medical Bills.)
According to the National Coalition on Healthcare, in 2009 the average premium for employee-only coverage was $4,824 just for insurance, and the average family of four was $13,375. Employees paid an average of 17% of the cost for single coverage and families paid an average of 27%. If you're an individual making $50,000 you could deduct $650, the amount of the premium that exceeds the 7.5% limit. (Remember, you can't deduct your premiums if you buy coverage through a payroll deduction using pretax dollars - in that case you've already earned your tax savings.) (For related reading, see Buying Private Health Insurance.)
A portion of money you pay for long-term care insurance can also ease your tax burden. Long-term care insurance is a deductible medical expense, and the IRS lets you deduct an increasing portion of your premium as you get older as long as the insurance is not subsidized by your employer or your spouse’s employer.
There's another often-overlooked benefit when you visit your doc: you can deduct the cost of transportation to obtain medical care, which means you can write off the expense of taking the bus, car expenses (the standard mileage deduction for medical purposes), tolls and parking.
You can also deduct any additional copayments, prescription drugs, lab fees and more as part of your medical expenses - if your total expenses exceed the 7.5% limit. The IRS also allows you to factor in common fees and services if they are not fully covered by your insurance plan, such as therapy and nursing services. In fact, the IRS' definition of medical expenses is fairly broad and can even include such items as acupuncture and smoking-cessation programs.
(REFERENCE: 10 Most Overlooked Tax Deductions)
