Hidden Tax Deductible Items
Tax return preparation is very difficult for most people even if you are going to a trained professional like my self. Often deductions are missed simply because the taxpayer has not thought of them and the tax preparer has not asked. Here is a list of the most commonly missed tax deductible items.
1. The medical mileage deduction for 2007 is $.20 per mile and $.19 per mile for 2008. Trips from home to the doctor and the hospital are included when calculating total miles for the calendar year. Sometimes a client does not know off hand how many miles this actually is but when you start adding them up it can create a very large deduction.
2. Interest paid on a 2nd mortgage is deductible as long as the residence has a function kitchen and bathroom. Have you ever considered your motor home in this hidden tax deductible item?
3. Charitable deductions are made and often forgotten about. Sometime we just cannot remember the box of cookies we bought from our neighbor’s daughter who is with girls scouts as well as many other donations throughout the year. Add them upyou will not be sorry.
4. If you had to move during the year for work then do not forget the moving expenses. You must meet certain tests so be sure to discuss this with your tax advisor. Tax deductible items include $.20 per mile, actual out of pocket expenses for oil and gas. Also include expenses for storage of household goods and lodging expenses.
5. Alimony is deductible by the payer and reportable by the recipient. Do not pass this up as this can take a little pain away from the amount being paid each month to the ex. If you are in a 28% tax bracket and the alimony amount is $1000.00 per month then the annual tax reduction is $3,360.
6. Interest paid on student loans is deductible. Many times after graduation you take a new job and your address changes. The year end statement showing the amount of interest paid for the calendar year gets misplaced. Therefore, if you paid student loan interest or have a child that did do not pass this tax deductible item up.
7. Most of us know that we can deduct our real estate taxes on our home but did you also know the state income taxes withheld from your W-2 are also deductible. Also the state income taxes paid during the year for a prior year should be included as a deduction.
8. Loans made to family and friends who have failed to repay you are deductible as worthless debts on Schedule D. You are limited to $3,000 per year until the full loss is taken. But if you have capital gains then the whole loss can be taken up to the amount of the capital gain plus $3,000.
9. Did you dabble in any kind of business on the side? Be sure to add up all the expenses and at least let your tax preparer know about your effort to enter the self employment arena so he can help you include all the deductions you entitled to.
10. Often clients will rent a home to a family member and will not want to report the rental income. This is a big mistake because it is illegal but you also miss out on legitimate tax deductions that when properly totaled create a loss on your 1040 that goes against income from other sources.
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