Commonly Missed Tax Deductions | EasyTaxSupport.com

Commonly Missed Tax Deductions

Although everyone takes steps to ensure they don’t have any errors or miss out on any deduction that they could have claimed still it is a very common phenomenon that most people indulge in unknowingly and unwontedly. I will illustrate some of the commonly missed tax deductions mistakes that people make in the following paragraphs to come.

Personal Expenses

Limit on itemized deductions: The amount of adjusted gross income allowed without limiting your itemized deductions has increased. For 2006, if your adjusted gross income is more than $150,500 ($75,250 if you are married filing separately), you may have to reduce the amount of certain itemized deductions, including most miscellaneous deductions. Limit on certain business-related meals and entertainment expenses. The limit on certain business-related meals and entertainment expenses has increased from 70% to 75%.
Educator expenses: The deduction for educator expenses as an adjustment to income expired at the end of 2005.

The following constitute personal expenses:

Student loan interest

Alimony paid (excludes child support)

Points paid on mortgaging/ refinancing

Fees for tax preparation/ tax advice

Dependent care provider’s name, address, and EIN #

Gambling losses to the extent of winnings

Penalty on early withdrawal of savings

Cost of safe deposit box used for investments or business

Job search expenses

Un-reimbursed job expenses (including travel, meals, lodging, & entertainment)

Employee’s moving expenses

Dues to professional organizations

Tools bought for use on job

Cellular phone used for job expense

Employment agency fees/ commissions

Medical Expenses

Medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. They include the costs of equipment, supplies, and diagnostic devices needed for these purposes. They also include dental expenses. Medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness. Do not include expenses that are merely beneficial to general health, such as vitamins or a vacation. Medical expenses include the premiums you pay for insurance that covers the expenses of medical care, and the amounts you pay for transportation to get medical care. Medical expenses also include amounts paid for qualified long-term care services and limited amounts paid for any qualified long-term care insurance contract.

Adjustment of health insurance premiums for self-employed individuals on Form 1040
Medical Transportation
Dental expenses
Nursing home expenses that are primarily for medical care
Medical aids (crutches, canes & orthopedic shoes)
Hearing aids, eyeglasses & contact lenses
Hospital fees for specific services (nursing, physical therapy, lab tests & x-rays)
Equipment for disabled/ handicapped individuals
Portion of assisted living fees made payable to retirement homes designated for medical care
Alcohol and drug abuse treatment programs, and designated anti-smoking treatments
Tuition for specialty schools catering to mentally/ physically impaired individuals
Wages for nursing services

Business Expenses

Self-employed persons and employees report business expenses differently.
The following information explains what forms you must use to deduct the cost of your qualifying work-related education as a business expense.

Self-Employed Persons

If you are self-employed, you must report the cost of your qualifying work-related education on the appropriate form used to report your business income and expenses. If your educational expenses include expenses for a car or truck, travel, meals, report those expenses the same way you report other business expenses for those items.

The following can be deducted as business expenses:

Casualty and theft losses totaling more than 10% of the adjusted gross income, and/ or in excess of $100
Educational expenses made payable to maintain/ improve job related skills
Handicapped individual’s job related expenses
Publications that are professionally related: journals, magazines & newspapers
Seeing-eye dog/ guard dogs for business
Job required uniforms not suitable for street wear
Union dues
Home office expenses (home is primary place of business)
New business start-up costs
Business gifts up to $25 per client
Business related travel expenses: meals, lodging & entertainment not reimbursed by employer
Cleaning/ laundering services for business travel
Tools bought for work related purposes
Work related cellular phones

Taxes Paid

General sales taxes are no longer deductible. You can no longer elect to deduct state and local general sales taxes instead of state and local income taxes as an itemized deduction on Schedule A (Form 1040).

State income taxes owed from a prior year, and paid in the current tax year
Taxes to a foreign government
Mandatory contributions to state disability funds

Charitable Contributions

Qualified charitable distributions from IRAs - If you were at least age 701/2when you had a qualified charitable distribution (QCD) from your IRA made directly by the trustee to a charitable organization, the QCD may be nontaxable. However, you cannot take a charitable contribution deduction for the QCD on your Schedule A (Form 1040).

Clothing and household items - You cannot take a deduction for clothing or household items you donate after August 17, 2006, unless the clothing or household items are in good used condition or better.

Food inventory - The special rules that apply to contributions of food inventory were due to expire at the end of 2005 but have been extended to contributions made in 2006 and 2007.

Limit on qualified conservation contributions increased - The limit on the deduction for certain contributions of capital gain property has been increased from 30% of adjusted gross income (AGI) to 50% of AGI in the case of qualified conservation contributions. The limit is 100% of AGI for certain farmers and ranchers.

Easements on buildings in historic districts - New requirements apply to contributions after July 25, 2006, of certain easements on buildings in registered historic districts.

The following are good examples of charitable contributions:

Property donated to a recognized charity (over $500 requires a receipt)
Cash contributions to a recognized charity
Mileage incurred in relation to charitable activities.

Home Computer Used for Job

Cost of hardware, computers, printers, etc.
Computer software
Online service provider (AOL, MSN, etc.)
DSL/ Cable/ telephone charges

Miscellaneous

Clean fuel credit
New points on refinancing
Old points on refinancing
Retirement tax credit

Now that I have discussed whole lot of deductions that one can have but is commonly missed, make a note of each and every deduction and don’t forget to utilize it if you qualify for them.