Maximizing your federal income tax deductions is one way to lower your tax bill. The Internal Revenue Service allows you to deduct the greater of your itemized deductions or the standard deduction. The IRS will review your itemized deductions so it’s a good idea to keep your receipts to back up your deduction amount. You report your itemized deductions on Schedule A and transfer the total to the Form 1040 federal individual income tax return.
Health Care Deductions
The IRS lets you deduct the costs of necessary medical and dental care. Doctor’s visits, diagnostic tests, emergency room visits, hospital stays, and convalescent and rehabilitation care are all deductible. Nontraditional medical care including acupuncture is also deductible. Prosthetics, crutches and wheelchair expenses can be deducted. Routine dental care, dental surgery and dentures are all IRS-approved deductions. At the time of publication, the IRS raised the deduction percentage from 7.5 to 10 percent. Individuals 65 years or older may still use the old 7.5 percent rate. You can deduct the amount that exceeds 10 percent of your adjusted gross income.
Paid Taxes Deduction
The taxes you paid during the previous tax year are fully deductible. State and local personal property taxes for your primary and secondary residences are deductible. Likewise, state, local and foreign income taxes and real estate taxes are all deductible. You can also deduct your state and local general sales tax.
Interest Expense Deduction
If you bought real estate for non-business purposes, you can deduct the points you paid on the loan along with the mortgage interest. You can continue deducting the mortgage interest along with the mortgage insurance premiums for each year you pay these items. The IRS allows you to deduct the full amounts you paid on your tax return.
Charitable Gifts Deduction
To take a charitable gift deduction, the charity must be qualified under IRS regulations. You must report gifts of cash and checks separately from property gifts. Property gifts must be valued at their fair market value. Gifts of cash, checks and property worth more than $500 must be reported on Form 8283, Section A. Property gifts worth more than $5,000 must be appraised by a qualified appraiser. You must complete Form 8283, Section B. If a property gift is worth more than $500,000, you must send a copy of the qualified appraisal along with your tax return. You can deduct the full amount of your charitable gifts on your tax return.
Unreimbursed Employee Business Expense
You can deduct job-related expenses if your employer has not reimbursed you. You can deduct the full amount of your travel expenses, including parking fees, tolls, bus, train and plane fare. You can deduct 50 percent of your total meal expenses or use the IRS standard meal allowance, whichever is greater. To calculate your deduction amount, multiply your AGI by 2 percent. You can deduct the amount that exceeds 2 percent of your AGI on Schedule A.
- IRS Tax Topics: Topic 502 - Medical and Dental Expenses
- IRS Tax Topic: Topic 503 - Deductible Taxes
- IRS Tax Topic: Topic 505 – Interest Expense
- IRS Tax Topics: Topic 506 - Charitable Contributions
- IRS Publication 463 (2012), Travel, Entertainment, Gift, and Car Expenses: Travel
- Topic 514 - Employee Business Expenses
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