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Commonly Overlooked Tax Deductions

Commonly Overlooked Tax Deductions

Deductions for Homeowners or Real Property Owners

Many taxpayers are not fully informed on all of the deductions available to them and miss valuable opportunities to save money. Below is a list of some of the most commonly overlooked deductions.

Deductions for Homeowners or Real Property Owners

Expenses Associated With the Sale of a Home or Other Real Property:

You can deduct the costs associated with selling your home, which include the commission you paid your real estate agent, any legal fees and closing costs.

Mortgage Insurance Premiums:

If you took out a first mortgage or refinanced after January 1, 2007 and are paying private mortgage insurance (PMI), that expense is now deductible. This deduction is scheduled to expire after 2010.

Points Paid onRefinance of a Home Loan:

Any points paid as part of the purchase of a new home are fully deducted in the year of purchase. However, when an existing mortgage is refinanced, any points paid as part of the refinancing must be deducted (amortized) over the life of the refinance loan. For most loans this will be over a 30 year period. In the year a refinanced loan is paid off (due to sale of the house or another refinancing), any remaining points can be fully deducted in the year of the refinancing. There’s one exception to this rule:  If a refinanced loan is again refinanced with the same lender, any points paid on the latest refinancing must be added to any remaining points from the previous refinancing and the total deducted over the life of the new loan,  just as with a first-time refinancing.

Property Tax Deduction for Non-itemizers:

If you don’t itemize your deductions but pay property taxes, you qualify for an additional standard deduction of up to $500 (up to $1,000 if married filing jointly).  While this benefit was initially good only for 2008, Congress extended it into 2009. There are no income limits to claim this extra deduction. You claim the deduction as an addition to your regular standard deduction on Form 1040 or Form 1040A.

Work Related Deductions

Educator Expenses:

If you are a teacher, and you paid for classroom supplies and other materials out of your own pocket, then you can claim up to $250 of classroom expenses for supplies, materials, books, software, etc. as a tax deduction. This deduction is available to those who do not itemize their deductions. In order to qualify for this deduction you must be a teacher, aide, instructor, counselor, or principal, and work at a kindergarten, grade school or high school for at least 900 hours during the school year.

Mileage Deductions: Between Jobs Mileage Deduction for Employees:

The IRS does not allow a mileage deduction from home to your first job location (known as commute mileage). However, if you travel to another job location from your first job location (such as for a second job or another job site), the mileage to get to the second location, and any other subsequent locations, is deductible. Mileage from the last job location of the day back to your home is not deductible.

Military Reservists’ Travel Expenses:

 Members of the National Guard or military reserve can deduct qualified travel expenses to drills or meetings. The travel distance must be more than 100 miles from home and an overnight stay is required. If you qualify, you can deduct the cost of lodging and half the cost of your meals, plus 55 cents per mile for 2009 for driving your own car to get to and from drills in addition to parking fees and tolls. This deduction is available to those who do not itemize deduction as well as those who do.

Professional Libraries:

Often an individual will have acollection of texts, CD’s, videos, etc. that they have built up over the years, but have never deducted in the past. If these libraries are used as reference or research materials for the taxpayers work, then the fair market value of the library, at the time it was placed in service, can be depreciated over 7 years (3 years for a CD collection).


Qualified Performing Artist Employee Deduction:

Performing artists (actors,musicians, etc.) who worked for two or more employers during the year, and were paid at least $200 by each of two or more employers, can deduct any job-related expenses they paid for such as supplies, theatrical gear, etc. This deduction is available to individuals who do not itemize their deductions if their adjusted gross income is $16,000 or less. Otherwise such expenses would be included with itemized deductions.

Personal Deductions

Charitable Contributions: Small Out-of-Pocket Donations:

Often people forget to claim smaller charitable contributions they make. Ingredients used when preparing treats for a bake sale, purchases from a school fundraiser, equipment contributions to a qualified non-profit organization such as a youth sports organization, etc. can all be deducted.  

Charitable Contributions: Travel Expenses

The IRS allows taxpayers to claim a charitable contribution deduction for travel expenses necessarily incurred while you are away from home performing services for a charitable organization, but only if there is no significant element of personal pleasure, recreation, or vacation in the travel and only if the taxpayer was substantially involved in the charitable activity for which they incurred the travel expense once they reached their destination. These expenses include air, rail, and bus transportation, taxi fares or other costs of transportation between the airport or station and your hotel, lodging costs, and the cost of meals (note that charitable meal costs are not subject to the 50% limitation that applies to business meals.) You can also deduct out-of-pocket expenses for your car such as the cost of gas and oil, parking fees and tolls (but not general repair and maintenance expenses, depreciation, registration fees, or the costs of tires or insurance.) Or, you can deduct the standard charitable mileage allowance the IRS allows for charitable automobile expense.

Investors Expenses:

Investors can write off certain expenses related to their investments activities as an itemized deduction, if they are not actively engaged in investing as a business activity. Deductible expenses include all investment publications and subscription services, as well as financial advisor’s annual fees, mileage for visits to a broker or financial advisor, safety deposit boxes and other investment fees paid directly by the investor.

Individual Retirement Account (IRA) TrusteeFees:

IRA administrative fees that are billed separately and paid by you in connection with your IRA are deductible as a miscellaneous itemized deduction.

Job Search Expenses:

You can deduct job search expenses (except for expenses incurred in finding first-time employment oremployment in a new field of work) such as local and long distance phone calls,the costs of preparing and copying resumes, mailings, career counseling, employment agency placement fees paid by yourself (not by your employer), etc. If you travel to an area and, while there, you look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. You can deduct the travel expenses if the trip is primarily to look for a new job. Even if you cannot deduct the travel expenses to and from an area, you can deduct the expenses of looking for a new job in your present occupation while in the area.

Mileage Deductions: Charitable Work Mileage:

Whileyou are adding up those miles, if you work with a charity, be sure you take adeduction for the miles you drive related to your charity work.

Mileage Deductions: Medical Care Mileage:

TheIRS allows you to deduct mileage if the drive is "primarily for, and essential to,” medical care. This deduction is particularly beneficial where frequent medical treatments outside the home are required, such as physical therapy, regular blood work, or even chemotherapy.

Moving Expenses to Take Your First Job:

 Job-hunting expenses incurred while looking for your first job are not deductible. But moving expenses related to taking your first job are. If you moved more than 50 miles, you can deduct the cost of getting yourself, your family and your household goods to the new area, including 24 cents per mile for driving your own vehicle for a 2009 move, plus parking fees and tolls. The same holds true for any new job you take.

State Taxes Paid the Previous Year:

If you had a state tax balance due that was paid when the state tax return was filed, then you can deduct any such amount from your current income tax return in the year actually paid.

State Sales Tax:

The IRS allows you to deduct your total state income taxes paid or your total sales tax paid. If you live in an area without state or local income taxes then deduct your total sales taxes paid. You can also include the sales tax paid on specific purchases such as automobiles and certain home improvement materials.

Student Loan Interest Paid on Behalf of a Non-Dependent Child:

If you make payments towards a student loan for your child who is not your dependent, under the former IRS rules neither the parent(s) nor the child could take a tax deduction for such payments. For current year tax returns, however, the IRS treats these payments as though they were money given to the child, who then paid the debt. So a child who’s not claimed as a dependent can qualify to deduct up to $2,500 of student loan interest paid by the parents.

Tax Preparation Costs:

Any expenses incurred for the preparation of tax returns can be deducted. This includes tax software and actual tax preparation services.

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