If you’re a receipt hoarder, tax time is like Christmas. There are so many items that can be deducted, and each year the list grows even longer. There may even be many expenditures that you have that you weren’t even aware that you could deduct, as several were extended with the Tax Relief Act of 2010.
Check out our list below to see which tax breaks you may be eligible for:
You can deduct these expenses even if you don’t itemize:
Educator Expenses, Form 1040, Line 23 – Everyone I’ve ever known who worked in education spends tons of their own money on stuff for the classroom. The IRS knows that and wants to give you a break. If you worked at least 900 hours during the school year in K-12 as a teacher, aide, counselor, or administrator, and bought ordinary and necessary items for the classroom out of your own money, you can deduct up to $250 worth of these costs right on your 1040. Anything above $250 can be deducted on your Schedule A if you itemize. Throw those receipts in a drawer anytime you buy something and it’ll add up by the end of the year.
Lifetime Learning Credit, Form 1040, Line 50 – If you took some classes this year to improve your job skills, learn to blow glass, or pick up a new language, you can get up to $2,000 in tax credits with the Lifetime Learning Credit. If your spouse or any of your dependents took classes, you can also take this credit for them, once each year for each person, as long as you aren’t already using another education-related credit for the same expenses. Many of us need continuing education credits for our jobs, so any money you paid for those classes or workshops can come right back in your pocket.
Penalty on Early Withdrawal of Savings, Form 1040, Line 30 – Withdrawing the money from a certificate of deposit (CD) early is painful, not just because of the lost interest but also from the big fat fee you’ll get hit with at most banks. You can deduct that fee from your income, however, and at least you’ll save some money on your taxes.
Itemizing your deductions? Add it up!
Itemizing this year, or think you might be able to? If the deductions you’re able to cobble together exceed the standard deduction, you can continue to add on to your tax savings by finding extra expenses to deduct on your Schedule A, like the ones below.
Tax Preparation Fees, Line 22 – Paying to have your taxes prepared by an accountant or tax program can be expensive, but you can get some of that back by deducting last year’s tax prep fees on this year’s return. (And then don’t forget to deduct this year’s fees next year.)
Hobby Expenses, Line 28 – If you have a hobby that makes you some money, but not enough to be considered a business (or, on the flip side, if you have a business that’s made so little money the IRS considers it a hobby) you can deduct the expenses you racked up while running your worm farm or rope course. However, you can only deduct your expenses up to the amount you made off the hobby. So if you have a hobby that makes no money at all, you can’t deduct those costs.
Personal Legal Bills, Line 28 – While I doubt the IRS guys watch a lot of Judge Judy, they do allow you to deduct legal fees you incurred while obtaining taxable items like spousal support or property. If you lose, or there wasn’t taxable money at stake, you can’t deduct it. This might come in handy if you had a divorce or injury lawsuit.
Charitable Mileage, Line 16 – Did you make rounds for Meals on Wheels, deliver canned goods to the food pantry, or pick up clothing donations for a clothing drive? You can deduct 14 cents per mile that you drove for charitable purposes, as well as parking expenses or any public transportation costs such as city bus tickets. (I once drove 600 pounds of dog food across the country – for a good cause, of course.) Keep a notebook in your car and watch those miles add up. It’s free money.
Contributions to Fraternal Lodge Societies, Line 16 – If you’re a member of a fraternal lodge society, or simply like to give money to guys wearing a fez, any donations above required dues are considered charitable donations if they are used for qualified charitable purposes, such as if the society donates them to a charity, or if the society has its own charity (like the Shriners hospitals.) This is up to a maximum of 30% of your adjusted gross income.
Property taxes on a timeshare, Line 6 – Some timeshare properties will pass on the property taxes to the owners of the timeshare units, and all property taxes are tax-deductible. Sometimes this may be included in the yearly maintenance fee, so if you don’t see a specific line item for property taxes, it’s worth it to call the property manager to see if you did, in fact, pay any. Additionally, if you sold a home or timeshare this year, you may have already paid some property taxes for the year. These should be on your settlement statement and you can deduct them even though you no longer own the home or timeshare.
Last Year’s State Taxes, Line 5a – Did you pay state taxes last year? Last year’s state taxes are this year’s federal tax deductions, as long as you paid them this year. Financial planning or financial management costs, Line 22 – A good investment advisor or reputable newsletter can help you make good decisions with your investments. It can also help you get a bigger refund because you can deduct these costs. You can also deduct other financial-related costs here such as attorney fees if they prepared a trust document for you.
Losses Due to Theft or Destruction, Line 19 – Every time a hail storm hits in my neighborhood, the insurance adjustors and roof repairmen follow close behind. But if your insurance doesn’t cover certain acts of nature, you can deduct the amount that your car, home, or other property went down in value due to this. This also applies if items were stolen from you and weren’t covered by your insurance. You can’t deduct the first $100 in the loss on any one item – so if something under $100 was stolen, you won’t be able to deduct it – but it’ll help soothe the pain of having your bike stolen.
Medical expenditures help you pile on the deductions
Do you think you might be able to itemize but aren’t sure if you have enough to make it worthwhile? One of the most confusing lines on the Schedule A (the form where you itemize your deductions) is for medical expenditures. It’s also one of the most valuable, so if you can deduct your medical expenditures, you’ve made a big addition to your itemized deduction. In order to deduct medical expenditures, they must add up to MORE than 7.5% of your adjusted gross income. So if you had a pretty expensive year, but haven’t quite gotten to that threshold, you might be able to tip over that line by adding in some of the often-overlooked deductions below. (You’ll total up all of your medical expenditures, and those you paid for your spouse or any dependents, and put the amount on Line 1 of Schedule A – the IRS doesn’t ask for specifics.)
Medical Mileage – If you’re going to a lot of doctor’s appointments, especially if you live in a rural area and drive quite some distance, you can deduct 16.5 cents per mile driven for medical reasons. Keep a little notebook in the car and write down the date, the mileage on your car when you started, the mileage on your car when you get back, and a short note about the reason (“optometrist appointment”). You’d be surprised how fast those miles add up.
Medicare B and D Premiums – If you signed up for Medicare Part B or Part D voluntarily, the premiums that you pay have been classified by the IRS as medical expenses. As these can be expensive, you’ll definitely want to add these in.
Breastfeeding Equipment and Pumps – The year in which your newborn arrives is going to be a very expensive one, between the diapers, hospital stays, and what seems like a thousand well-baby doctor visits. And if you’re breastfeeding, the equipment can be an expensive cherry on top. Make sure you deduct the price of those pumps as a medical expense – the IRS just declared it to be a valid medical expense this year. And if the little one took his time getting here, pregnancy test expenses are also deductible.
Medical Conferences – If you or your spouse suffer from a particular illness, you can learn quite a lot by going to a special medical conference that focuses on that illness. As long as you spend most of your time there going to sessions and not hanging out by the pool, you can deduct your admission fees and any transportation costs (but not lodging or food while you are there.)
Bandages – Yes, you can deduct the cost of your Band-Aids. I don’t know why bandages get special treatment, but they do.
The IRS allows literally hundreds of different expenses to be deducted under medical expenditures. Here is a complete list. Check it out to see what else you can add. Most common medical expenditures, such as eyeglasses, prescription drugs, dentures or ambulance services, are included.
Happy deducting and when in doubt, always check in with a tax professional.