Tax Deductions You May Not Know About

There are many tax deductions that you yourself may not know about. Here I will post with the help of, a few of the most popular tax write offs, that not everyone is aware of:

  • Prescription drugs– how to get it: just go to your drug store and ask for a print out for your taxes. They will know exactly what you mean as they do this procedure almost daily for MANY MANY people. Your costs have to be over a certain amount but it is worth finding out how much you have spent on prescription drugs this past year 😀
  • Investments and tax expenses– how to get it: Many of us forget tax planning and investment expenses because they are part of miscellaneous itemized expenses. Their total must exceed 2% of your adjusted gross income before you get any tax benefit.Expenses to track include your employee business expenses, tax preparation fees and even the portion of your legal or accounting fees relating to tax planning. For example, in a divorce, the legal time spent relating to the tax aspects of alimony and child support would qualify. So too would the tax aspects of estate planning.Many people shortchange themselves on the deduction of investment expenses. They remember the safety deposit box fees. But how about the annual fee paid your broker and any IRA fees you pay directly? You may remember the cost of your investment publications on subscription — such as Forbes, Fortune, BusinessWeek, Worth and Barron’s. But how about the investment newspapers you buy off the newsstands? You keep track of your long-distance phone calls to your broker and investment adviser, but how about the mileage to go see them?
  • Clean Fuel Credit– how to get it: Credits are good because they are a dollar-for-dollar reduction in tax. And if you bought a new hybrid gas-electric auto or truck in 2007, you can get a conservation tax credit of between $250 and $1,000 and an additional fuel economy credit of between $400 and $2,400, depending on the make and the fuel economy. A hybrid car combines an electric motor with a gas fueled internal combustion engine.But act quickly. The credit starts to phase out when the auto manufacturer sells its 60,000th hybrid vehicle. That’s the total per manufacturer, not 60,000 per model. Once the cap is reached, the phaseout starts at the beginning of the second subsequent calendar quarter.
  • Non cash contributions– how to get it: Charity is one, and let’s say you emptied your closets and gave everything to Goodwill or a similar charity. The value of your donated items — clothes, furniture, whatever — is deductible. Get a written receipt. With non cash charitable contributions, the rule is simple: No receipt means no deduction if you get audited. Clothes and household goods must be in good or better condition to get the deduction.
  • Health Insurance Premiums– how to get it: Any health insurance premiums you pay, including some long-term-care premiums based on your age, are potentially deductible. You have to add these, however, to your medical expense pot. Medical expenses have to exceed 7.5% of your adjusted gross income (AGI) before they give you any tax benefit.But if you’re self-employed and not covered by any other employer-paid plan, you can deduct 100% your health insurance premiums “above the line.” Above the line means the expense is included in adjusted gross income and doesn’t get lumped in with itemized deductions. That means that you not only don’t have to exceed the 7.5% floor, you don’t even have to itemize!
  • Educator expenses– how to get it:If you’re a qualified educator, you can get an above-the-line deduction of as much as $250 for materials you bought in 2007 and may buy in 2008. That includes books, supplies and even computer equipment. You qualify if you’re a kindergarten through grade 12 teacher, aide, instructor or principal.
  • Student higher education expenses– how to get it: For 2007, if your adjusted gross income isn’t more than $65,000 ($130,000 on a joint return), you can get an above-the-line deduction of as much as $4,000 for any higher-education expenses you paid. Now, the law expires after 2007. So, again, this is one that bears watching, although I see the break getting renewed.See if you qualify for the Hope and Lifetime Learning credits. The Hope credit is worth as much as $1,650 per student subject to income limits for 2007 and $1,800 for 2008. The Lifetime Learning credit is worth as much as $2,000 per return. Compare the credit with the deduction, and go with the one which gives you the biggest benefit. And, if you don’t qualify for either credit, you may be able to deduct up to $4,000 in education expenses in 2007 and, one hopes, in 2008. Again, Congress has to renew the break. (I’m sorry if this sounds like a bad record.)
  • Casualty deductions– how to get it: Last year brought forest and range fires aplenty, and every one remembers Hurricanes Katrina and Rita, which devastated the Gulf Coast in 2005.If President Bush declared your area a disaster area, you can claim your loss either on your 2007 return or your 2006 return. You can confirm whether you qualify on the Federal Emergency Management Agency’s Web site.
  • Retirement Tax Credit– How to get it: This one also can come with a deduction. This credit is designed to give moderate- and low-income taxpayers an incentive to save for retirement.Make a contribution into your retirement account. That money isn’t taxed currently. So, it’s like you got a deduction off your income. In addition, you get a credit of as much as 50% of the first $2,000 invested. That’s as much as a $1,000 reduction in your tax.***Be sure to add these deductions if applicable to your tax return. Good luck 😀 ***

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