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Don’t Miss These Commonly Overlooked Tax Deductions
 

Each year people miss opportunities to take valuable deductions off of their tax bill.  Fortunately, tax returns can be amended up to three years from their due date through IRS Form 1040X.  When itemizing deductions, always make certain to have thorough documentation of your deductible expenses.

Some of the most commonly missed deductions are:

Real Estate Tax Deductions

Refer to your closing statement for proof of the following deductions. 

  • Principal Residence Acquisition Mortgage Fee – If you bought a principal residence within the last year and paid “points” on the loan, that “home acquisition mortgage loan fee” is tax deductible. 
  • Home Mortgage Refinance Loan Fees – Any loan fee or points paid when refinancing can be deducted over the life of the mortgage. 
  • Loan Fees not yet deducted – If you refinance a previously refinanced home loan, you may fully deduct any remaining loan fee not yet deduced in the tax year of the second refinance. 
  • Mortgage Prepayment Penalty – Any prepayment penalty due to paying off a home loan early is deductible.
  • Prorated Property Tax – Your share of prorated property taxes in the year of a home sale is deductible. 

Charitable Contributions

If you charged contributions to qualified charities, the deduction is allowed in the year of the charge, not when you actually pay your credit card bill.  Make sure you get a receipt for any non-cash items you donate.  Out-of-pocket expenses related to charitable activities such as mileage, parking and tolls are also deductible.

Medical Expenses

The IRS allows a deduction for medical expenses exceeding 7.5 percent of your Adjusted Gross Income.  You cannot include medical costs that were covered by your insurance company or unqualified expenses such as voluntary cosmetic surgery.

Clean Fuel Deduction

With hybrid cars gaining in popularity, many can benefit from the clean fuel deduction.  The deduction amount is limited to $2,000 for cars first put into service in 2004 and 2005.  The deduction will be reduced to $500 for vehicles in 2006 after which it will not be allowed. 

Miscellaneous Deductions

Miscellaneous deductions, those that are necessary for the production of income, must add up to two percent of your Adjusted Gross Income.  Miscellaneous deductions that are allowed include legal and accounting fees, education expenses related to maintaining or improving job skills, safety deposit box fees, job seeking expenses (in the same field as your current career), work-related expenses that have not been reimbursed (such as subscriptions to publications, professional association membership dues, business liability insurance, cost of safety equipment, etc.) and investment expenses (such as IRA fees, mileage and long distance phone calls to your investment advisor, investment publications, etc.) 

Retirement Tax Credit

Moderate and low-income taxpayers can get a credit of as much as 50 percent of the first $2,000 they invest in an IRA or 401K. 

Moving Expenses

You may qualify for the moving-cost deduction if you changed both your job site and your residence but were not reimbursed for household moving costs.  To qualify, your new job location must be at least 50 miles farther from your former home than your old main job location was.  In addition, you must be employed full time for at least 39 weeks during the 12 months right after you move. If self-employed you must work at least 78 weeks during the 24 months after you move. 

Casualty Loss

If you suffered a "sudden, unexpected or unusual" loss (fire, hurricane, tornado, earthquake, mudslide, flood, theft, riot, embezzlement, vandalism, etc.) and were not reimbursed by insurance, you may be able to claim a casualty loss tax deduction.Each loss must be at least $100 and your total losses for the year need to be at least 10 percent of your adjusted gross income.


 

 
 

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1726A General George Patton Drive
Brentwood TN 37027
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