Let's see what you can itemize one more time

Schedule A, Itemized Deductions

Most known deductions for every taxpayer

Itemized deductions are captured on Schedule A as an alternative to taking the standard allowable deduction. To determine which is more favorable for your situation, it is often best to calculate your return both ways.

Generally, if you own your own home you will itemize deductions. To help you gather and retain the correct records, a list is provided here for your use. While the list is not all inclusive, it will give you a good starting point.

Medical & Dental Costs

Medical and Dental expenses are generally deductible to the extent they exceed 7.5% (.075) of your income.

Some of the more common expenses:

Ø  adoption

Ø  birth control pills (prescribed)

Ø  doctor/dentist fees

Ø  drug/alcohol treatment

Ø  guide dog costs

Ø  handicap access devices for disabled

Ø  hospital fees

Ø  insurance premiums

Ø  prescriptions

Ø  laser eye surgery

Ø  lead based paint removal cost

Ø  life-care fees for medical treatment

Ø  long-term care ins prem.

Ø  meals/lodging related to hospital stays

Ø  medical devices

Ø  operations

Ø  organ donation

Ø  physician diet/health programs

Ø  psychiatric care

Ø  school and/or home for disabled

Ø  smoking cessation program cost

Ø  special life items: (glasses, limbs, dentures, wheelchairs, hearing aids, contacts, etc.)

Ø  transportation (medical related)

Ø  weight loss programs cost

If you have a situation that you are unsure of please contact me or your tax preparer for assistance.

Taxes

The following taxes are generally 100% deductible.

Ø  state/local taxes

Ø  property taxes

Ø  payments to mandatory state funds

Ø  foreign income taxes

Ø  real estate taxes

Ø  value based auto license fee

Ø  general state/local sales tax*

* Deduct either general state/local sales tax or state/local income tax.

Interest Expense

While most personal interest is no longer deductible (credit card interest, car loans, and the like), there are still interest expense deductions available to you.

Ø  home mortgage interest

Ø  2nd home mortgage interest

Ø  home equity loan interest

Ø  interest on special assessments (as real estate tax)

Ø  business interest

Ø  investment interest

Ø  “points” paid

Ø  mortgage insurance premiums*

*The deduction for mortgage insurance premiums paid or accrued is extended to 2008 thru 2010.

Charitable Contributions

(donating money or property)

Both cash and property are generally deductible if donated to qualified organizations. Qualified organizations include:

Ø  churches

Ø  non-profit schools

Ø  non-profit hospitals

Ø  public parks

Ø  boy & girl scouts

Ø  war/veterans groups

Ø  agencies such as: Red Cross, Salvation Army, Goodwill, CARE,

Ø  United Way etc.

Ø  YMCA/YWCA

Ø  some environmental/conservation groups

Tip: Make sure you also keep track of your mileage to and from the charity. It is also deductible.

Caution: The rules for deducting donations of vehicles to charities have changed. If the charity sells your vehicle without using or improving the vehicle, your deduction is limited to the gross proceeds from the sale not what could be a higher fair market value.

Casualty & Theft Losses

Casualty and Theft losses are generally deductible to the extent they exceed 10% of your adjusted gross income, are not reimbursable via insurance, and each event exceeds $100.

Ø  fire

Ø  theft

Ø  natural loss: tornado, hurricane, flood, etc.

Ø  car accident

Ø  vandalism

Ø  other accidents

Miscellaneous Deductions

Most miscellaneous deductions are only deductible to the extent they exceed 2% of your adjusted gross income. Items with an “*” are usually not subject to the income threshold.

Ø  gambling losses to offset gains*

Ø  handicapped job related expenses*

Ø  work uniforms

Ø  un-recovered annuity costs*

Ø  job hunting expenses

Ø  safe deposit box cost

Ø  tax prep fees

Ø  employee business expenses

Ø  hobby exp. to offset gains

Ø  50% of business related meals; entertainment

Ø  classroom material expense for teachers

Ø  repayments of income*

Ø  repayments of Social Security

Ø  investment related expenses

Ø  in-home office expenses

Ø  IRA/KEOGH administration fees

Ø  business use depreciation

Ø  certain legal fees

Ø  trust administration fees

Ø  job required medical exam

Ø  job required education expenses

Non-deductible Expenses

The following are non-deductible items:

Ø  accidental damage

Ø  blood donation

Ø  club dues

Ø  commuting expenses

Ø  cosmetic surgery

Ø  drought losses

Ø  estate/gift taxes

Ø  funeral expenses

Ø  gifts to foreign organizations

Ø  gifts to “for profit” groups

Ø  gifts to individuals

Ø  home repairs

Ø  labor union donations

Ø  license fees

Ø  life insurance prem.

Ø  lost property

Ø  non-essential education

Ø  non-health related: household help, health club dues

Ø  PAC donations

Ø  political donations

Ø  property assessments

Ø  raffle tickets

Ø  sales taxes (unless in lieu of state income taxes)

Ø  Soc. Sec./Medicare

Ø  tax penalties

Ø  termite/insect damage

Ø  tickets and fines

Tip: If you are a teacher you can deduct up to $250 in non-reimbursed classroom expenses. This deduction is available even if you do not itemize deductions on your tax return.

© 2008, Bruce Mc. All rights reserved.