Overlooked IRS Tax Deductions
Avoid paying more tax than necessary. Your Liberty Tax professional will probe to make sure that you claim all the tax deductions for which you are eligible. Be sure you claim these often overlooked IRS deductions:
Tax Preparation Fees
There might be a double benefit of having Liberty Tax prepare your return. The cost of filing your taxes is deductible under miscellaneous itemized tax deductions.
Moving Expenses
You can usually deduct moving expenses if you move because you change jobs. However, there are several requirements you must meet, such as a distance test and a time test.
Casualty or Theft Losses
If you lose property through a casualty or theft, you may be entitled to a tax deduction. Such casualties would include car accidents, fires, vandalism, disasters such as hurricanes or another identifiable event that is sudden, unexpected or unusual in nature. If your property is covered by insurance, you subtract any insurance or other reimbursement you received or expect to receive when you figure your loss. You claim your casualty or theft loss on Form 4684, Casualties and Thefts.
Medical Expenses
If you itemize your deductions, these expenses are deductible only when paid by you, and the unreimbursed expenses exceed 7.5% of your adjusted gross income. These expenses include the premiums for insurance that covers the expenses of medical and dental care, and the amounts you pay for transportation for these purposes.
Charitable Contributions
Contributions can be of cash (includes check and credit card donations) or noncash items. If you donate clothes or furniture to a qualified charity, the value of those items may be deductible if they are in good used condition or better. Keep receipts from charity, noting the items donated as well as their fair market value when donated. Cash contributions, regardless of the amount, require a bank record or written confirmation from the charity.
Your deduction for a car donated to a qualified organization is limited to the gross proceeds from its sale by the organization if the claimed value is more than $500.
For a donation valued at more than $500, Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes issued by the charity must be attached to the tax return. Without the Form 1098-C, you cannot deduct your contribution. However, if the organization makes significant intervening use of, or materially improves the car, it will be marked on Form 1098-C and you generally can deduct its fair market value.
Total noncash contributions over $500 require you to complete Section A of Form 8283, Noncash Charitable Contributions. Contributions of noncash items valued at over $5,000 require an appraisal and completion of Section B of Form 8283.
Sales Tax and Personal Property Tax
You have the option of deducting your state sales tax or your state income tax. Which IRS deductions should you take? That's an easy one if you live in a state with no income tax or sales tax. If your state levies both, your Liberty Tax professional will compare your state and local income tax to determine which is more beneficial for you. Be sure to take tax deductions on any personal property tax you paid on a car, boat or airplane.
Legal Expenses
Legal fees such as for an adoption, divorce or property settlement are not deductible. However, legal fees to produce taxable income or to collect taxable income such as alimony or those related to doing or keeping your job are deductible as miscellaneous itemized deductions on Schedule A, subject to the 2% limit.
EMPLOYMENT EXPENSES, FORM 2106 OR 2106-EZ
Un-reimbursed Employee Expense
An employee with business expenses that are not reimbursed or exceed the amount reimbursed by the employer can generally deduct them as miscellaneous tax deductions subject to the 2% adjusted gross income limit.
Local Transportation
Use Form 2106, Employee Business Expenses, or Form 2106-EZ, Unreimbursed Employee Business Expenses, to figure your deduction for employee business expenses. You can deduct the expenses that exceed 2% of your adjusted gross income. Depending on your employer’s reimbursement arrangement, special rules may apply. If a personal vehicle is used for business purposes, either a standard mileage rate or actual expenses can be claimed. Good written records are required.
Uniforms and Work Clothes
Work clothes and uniforms are deductible if they are required for your job and not suitable to wear outside the workplace. Protective gear such as hard hats and steel-toed boots qualify if necessary for your job.
Work-Related Educational Expenses
You may be able to deduct work-related educational expenses for education that:
• Maintains or improves skills required in your present job or business,
• Serves a business purpose and is required by your employer, or by law or regulation, to keep your salary, status or job.
Your expenses are not deductible if the education is required to meet the minimum educational requirements of your job or is part of a program that will qualify you for a new trade or business. Expenses include tuition, books, supplies, and certain transportation or travel costs.
Liberty Tax professionals are available for your tax needs. Please be sure to visit your neighborhood Liberty Tax office for further information about these overlooked IRS deductions and others.
