Medical and Dental Expenses
You may deduct only the part of your medical and dental expenses that exceeds 7.5% of your adjusted gross income if you are older than age 65. The threshold rises to 10% if you are under the age of 65. Publication 502, Medical and Dental Expenses, discusses the types of expenses that may and may not be deducted.
Some examples you may deduct are:
- Insurance premiums for medical and dental care (special rules apply to self-employed health insurance)
- Prescription medicines
- Fees for medical doctors, dentists, chiropractors, psychiatrists, psychologists, physical therapists, eye doctors and psychoanalysts
- X-ray and laboratory services
- Hospital care
- A program to stop smoking and prescription medicines to alleviate nicotine withdrawal
- Medical aids such as eyeglasses, contacts and hearing aids
- Ambulance services
- Use of your own car to get medical care:
- 24 cents per mile for 2013 or actual costs for gas and oil.
- Remember, you may also add parking and tolls to either method.
Some examples you may not deduct are:
- Cosmetic surgery (some exceptions apply)
- Life insurance or income protection premiums
- Nonprescription medicines
Taxes You Paid:
State and Local Income Taxes
You may deduct the state and local income taxes that you paid in the current tax year from your W-2, W-2G, 1099-G, 1099-R or 1099-MISC. You may also deduct state and local estimated tax payments made during the current year, including any part of a prior year refund that you chose to have credited to your current year state or local income taxes. State and local income taxes paid in the current year for a prior year, such as taxes paid with your tax return at the time it was filed, may also be deducted. You may not deduct federal income or excise taxes or federal estate and gift taxes.
Sales Taxes
You may deduct the greater of sales tax paid or state and local income taxes paid during the year. This is especially useful in states with no income tax. There are tables published by the IRS that will provide a deduction amount or you may calculate your actual sales tax paid for the year. Sales tax paid on any large ticket item like a boat, car or appliance may be added to the amount from the IRS table—so keep track of sales tax paid for those items.
Real Estate Taxes
The state, local or foreign taxes that are deductible are taxes you paid, based on the assessed value of the property, on real estate you own that was not used for business.
Personal Property Taxes
Personal property tax that may be deducted are the taxes that are based on the value of the personal property, such as ad valorum taxes on a vehicle or intangible state taxes. Any fees should not be included, such as a license fee.
Interest You Paid:
Home Mortgage Interest
Interest paid on a home mortgage on a loan secured by your first or second home may be deducted. This includes first and second mortgages, home equity loans and refinanced mortgages. If the total amount of all mortgages is more than the fair market value of the home, there are limits that apply to the deduction. See Publication 936, Home Mortgage Interest Deduction, for more specific details on the limits that may apply.
Investment Interest
Investment interest is interest paid on money you borrowed that is allocable to property held for investment. It does not include any interest allocable to passive activities or to securities that generate tax-exempt income. You must complete and attach Form 4952, Investment Interest Expense Deduction, to figure your deduction unless you meet all three of the exceptions. Refer to IRS Publication 550, Investment Income and Expenses, for more details.
Gifts to Charity:
You may deduct contributions or gifts you gave to organizations that are religious, charitable, educational, scientific or literary in purpose. You may also deduct what you gave to organizations that work to prevent cruelty to children or animals.
If you drove to and from volunteer work, you may take 14 cents per mile or the actual cost of the gas and oil. You may add parking and tolls to the amount you claim under either method.
Gifts by Check or Cash
If the total gift (cash, property or both) is less than $250, a canceled check is sufficient proof for the deduction. You may deduct a gift of $250 or more only if you have a statement from the charitable organization showing the amount of any money contributed and whether the organization did or did not give you any goods or services in return for your contribution. As long as each check is less than $250, a receipt or statement from the charity will not be required even if total donations to the charity for the year exceed $250. Limits apply if your contributions exceed more than 30% of your adjusted gross income.
Gifts Other Than Cash or Check
Gifts of property such as used items of clothing or furniture may be deducted for the amount of the fair market value at the time you gave them. If the amount of your deduction exceeds $500, you must complete and attach Form 8283, Noncash Charitable Contribution.
Casualty and Theft Losses
You may be able to deduct part or all of each loss caused by theft, vandalism, fire, storm or similar causes, and car, boat and other accidents. You must complete and attach Form 4684, Casualties and Thefts, to figure the amount of your loss. Refer to the instructions for Form 4684 for more details.
Job Expenses and Most Other Miscellaneous Deductions:
You may deduct only the part of the following miscellaneous deductions that exceed 2% of your adjusted gross income.
Unreimbursed Employee Expenses
This deduction is for job expenses that you paid for which you were not reimbursed. If you claim any travel, transportation, meal, or entertainment expenses for your job or your employer paid you for any of your job expenses, you must complete and attach Form 2106, Employee Business Expenses. Examples of these job expenses are:
- Safety equipment, small tools and supplies you needed for the job;
- Uniforms required by your employer, which you may not usually wear away from work;
- Protective clothing required in your work such as safety shoes or glasses;
- Dues to professional organizations and chambers of commerce;
- Subscriptions to professional journals;
- Fees to employment agencies and other costs to look for a new job in your present occupation (even if you do not get a new job); and
- Certain educational expenses (See Publication 508, Tax Benefits for Work-Related Education, for further details).
Tax Preparation Fees
You may deduct the fees you paid for preparation of your tax return, including fees paid for filing your return electronically.
Other Expenses
This deduction is for amounts paid to produce or collect taxable income and manage or protect property held for earning income.
Further detailed information is available in the IRS Instructions for Schedule A, Itemized Deductions, booklet. If you would like any further information regarding this issue as well as any other tax related issue, please contact Henssler Financial at 770-429-9166 or experts@henssler.com.
Disclosures
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
