Itemizing
Deductions —
What You Can and Cannot Deduct
By: Connie
Holt, E.A.
The Henssler Financial Group Position Paper
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. 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:
- 19 cents per mile for 2008; 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.
Real Estate Taxes
The state, local or foreign taxes that are deductible are taxes you paid on real estate you own, that were not used for business, if the taxes are based on the assessed value of the property.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 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 to figure your deduction unless you meet all three of the exceptions. Refer to IRS Publication 550 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
You may deduct a gift 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. 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.
Job Expenses and Most Other Miscellaneous Deductions:
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. Examples of these job expenses are:
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.