The Top Missed Itemized Deductions
The Internal Revenue Service allows you to claim a standard deduction or itemized deductions when you file your tax return. Individuals with deductions that exceed the amount of the standard deduction should itemize. Unless you hire a tax professional, it is easy to miss some tax deductions that may apply to you. Knowing some of the top missed itemized deductions can help you avoid throwing away money that may reduce your tax liability or possibly result in a tax refund.
If your medical expenses exceed 7.5 percent of your adjusted gross income, you can deduct any health insurance, Medicare and long-term care premiums you pay. Beginning in 2013, your medical expenses must exceed 10 percent of adjusted gross income to qualify for the deduction. The biggest, most common qualified medical expenses include payments for in-patient hospital care, nursing home care, prescription drugs, insulin, prescription eyeglasses and contacts, hearing aids, crutches, wheelchairs, and traveling and parking costs associated with visiting the doctor’s office. Self-employed individuals who are not covered by an employer-sponsored health plan can possibly deduct 100 percent of their medical expenses. If you lost your job because your employer outsourced it overseas, you may qualify to receive a tax credit for up to 72.5 percent of your health care cost. While a tax deduction reduces your taxable income, a tax credit is a direct dollar-for-dollar reduction of the amount of your taxes due. To qualify for the credit, you must receive trade adjustment assistance or a pension from the government after the termination of your employer-sponsored retirement plan.
Many taxpayers are aware of tax laws that allow you to write off your contributions made to a qualified charity. A commonly missed tax deduction that also relates to charitable organizations is the expenses related to any volunteer work you perform for a charity. You can claim the cost of mileage or gas if you attend meetings of a nonprofit you are involved in. The tax deduction excludes the actual volunteer work you do for the nonprofit. Other commonly missed tax deductions are non-monetary contributions made to charities. For example, if you donate clothes to a qualified nonprofit, you can take a tax deduction for the value of the donated items. You should obtain a receipt for all donations you make.
Homeowners can benefit from several tax deductions The IRS allows you to take tax deductions if you made home improvements for approved medical conditions. If you purchased a new home or refinanced your mortgage, you can take a tax deduction for points over the life of the loan. Points refer to fees and costs associated with obtaining a new mortgage. In most cases, you cannot deduct the full amount of points for the year. Homeowners who took out a loan for new construction of a home can deduct the interest for the first 24 months of the loan. The IRS also allows you to deduct the amount you paid for qualified mortgage insurance, which is insurance provided by the Department of Veteran Affairs, the Federal Housing Administration or the Rural Housing Service. If your adjusted gross income is more than $100,000, or $50,000 if married and filing separately, the IRS might reduce your deduction or eliminate it completely.
Another itemized deduction that is commonly missed applies to qualified educators. The IRS defines an educator as one who is a teacher, counselor, principal, instructor or aide of kindergarten through grade 12. You must also work at least 900 hours in a school year. You can take up to $250 of education-related expenses that are not reimbursed by your employer. If you and your spouse are educators, the deduction is $500 if you are married filing jointly. Qualified expenses include money spent for books, supplies, supplementary materials and certain software.