Tax season is here. For many Americans, this time of year means completing forms and reviewing finances. You may not be aware, but there are tax deductions and adjustments that can be applied to your situation. Below is a simple list of deductions you can make on a tax return:
Medical and dental
According to the IRS, “Medical care expenses must be primarily to alleviate or prevent a physical or mental disability or illness.” This means, you may deduct diagnosis, cure, mitigation, treatment or prevention of disease expenses, but exclude general health expenses (such as vitamins and supplements). As of January 1, 2013, you may itemize and deduct medical and dental expenses if they exceed 7.5% of your adjusted gross income.
Good news! Did you know there are four types of deductible non-business taxes? They include:
- State, local and foreign income taxes
- State and local general sales taxes
- State, local and foreign real estate taxes, and
- State and local personal property taxes
In order for these taxes to be deductible, they must be imposed on you and you must have paid it during the tax year.
When you are donating to an organization, it should be done out of altruism; however, you should be aware that there are tax benefits available if you donate to a reputable charity! When filing taxes, itemize your total charitable deductions and be sure to maintain all proper documentation of the donation. If you contributed over $250, then you must prove to the IRS that you made the donation and did not receive anything in return for it.
Casualty and theft losses
In case of casualty losses, which is defined as a loss that is sudden, unexpected or unusual (natural disasters, vandalism, etc.), you may claim these under itemized deductions. You may only deduct losses that were not reimbursed by insurance or elsewhere.
It is also possible to have a taxable gain after your property has been stolen, destroyed or damaged. You will be able to find your gain by subtracting the adjusted basis of the property at the time of the incident from the amount you receive from insurance or reimbursement. Once this is figured, you must use the adjusted basis to figure the gain, even if it decreases the market value.
Business & misc. expenses
Business expenses for W2 employees have strict limitations. If you spent money on job-related expenses, you must first seek reimbursement from your employer. If the employer refuses to reimburse you, then we can consider including it as a deduction on your tax return. In some cases, the IRS asks for written refusal from your employer.
Additionally, tax payers may also take adjustments of a tax return. You may be wondering the differences between a tax deduction and adjustment. Simply put, qualifying for an adjustment will lower the amount of taxes you pay. Below are the adjustments that can be made when you file a return:
- Educator Expenses (up to $250)
- Business expenses
- Performing artists
- Fee-basis government officials
- Health Savings Account
- Moving Expenses
- Half of Self-Employment Tax
- Self-employed retirement plans
- Penalty on early withdrawal of savings
- IRA Deduction
- Student Loan Interest
- Domestic Production Activities
Adjustments are found on page one of the 1040. Deductions are found on both Schedule A and page 2 of the 1040. These are a common selection of deductibles many professionals deduct from their taxes. It is also important to remember that for all deductions, you must keep a record in case of an audit. For more information about what you can and cannot deduct from your taxes, please contact us at (781) 436-5810 or hylencpa.com/contact-us!