Every person's tax situation is different, so a number of factors will come into play when individuals make a decision about whether to take a standard deduction or itemize their write-offs. While they should work with a tax preparer and calculate which option would reduce their liability the most, it's also helpful to know which types of deductions must be itemized in order to take them.
For instance, those who are writing off qualified medical expenses each year will be required to itemize these costs on their returns. There are a number of expenses that can be written off under this deduction, including co-payments and physician fees, prescription medications, eye glasses and eye care, treatments, health equipment and certain types of health programs. However, in order to qualify, the total sum of these costs must exceed 7.5 percent of the filer's adjusted gross income if they are writing them off for the 2012 tax year. This threshold will increase to 10 percent for the 2013 tax year.
Individuals who give to charity or make cash donations to charitable causes may also write these off on their taxes, so long as they itemize. Keep in mind that while completely legal and encouraged, a high volume of contributions and a big write-off can trigger more scrutiny from the Internal Revenue Service, so people should keep all receipts, invoices and other documentation that supports their deduction. Additionally, the IRS may require different documentation for various types of contributions - i.e. property, vehicles, cash and assets - so it helps to speak with a tax professional to make sure all paperwork is lined up.
Getting a deduction for your mortgage
Homeowners who paid mortgage points to obtain a home loan or build a house may be eligible to itemize them on their taxes and reduce their liability. Additionally, existing owners who refinanced their home loan may also be eligible to deduct their points, but the points paid have to be divided over the term of the home loan.
A large percentage of Americans are unemployed or dissatisfied in their current positions and looking for a new position. The IRS allows job seekers to write off expenses associated with looking for employment, ranging from resume printing costs, the price of traveling to and from interviews, placement service fees and other related financial burdens. The job hunting does not have to result in a new position for individuals to claim the deduction.
Lastly, residents who had local and state taxes withheld from their wages are permitted to itemize them on their tax forms, along with any prior year's state and local income taxes paid during the year.
For a more in-depth look at Liberty Tax Service, visit the Give Me Liberty! Magazine. Follow Liberty Tax on Facebook and on Twitter or contact Liberty Tax directly at 1-877-at-Liberty.