The vast majority of Americans take the standard deduction on a yearly basis. This is usually because itemizing your expenses takes time and effort because you must retain records throughout the year. It is also often more beneficial to take the standard deduction for most taxpayers. If you have thought about itemizing, you may want to consider some of the things that you can itemize and their limitations to see if it would be worth it to you.
The Goldberg Tax Practice can help you with this process. We can speak with you about your expenses to see if you would be a good candidate for an itemized deduction.
If you have large unreimbursed medical and dental expenses, itemizing might be a good option for you and your family. These expenses can include anything that was spent on you, your spouse, and your dependents. However, this deduction only “kicks in” once you have spent 10 percent of your adjusted gross income or 7.5 percent if you or your spouse is over the age 65.
Medical expenses that qualify for this deduction include virtually any medical expense that is necessary. It may not include certain cosmetic or elective surgeries. It can also include nursing home expenses or in-patient hospital expenses. Treatment related to substance abuse may also be considered a medical expense. Certain weight-loss program expenses may also qualify.
You may also be able to deduct expenses related to travel for medical reasons. For example, if you have to see a specialist in another state for your medical condition, then you should track the mileage and any over-night expenses that you may have. These items may be partially or wholly deductible as itemized expenses.
You can deduct a variety of taxes from other sources as long as you paid it directly and it was paid during the tax year. Examples of deductible taxes include:
· Income taxes (state, local, and foreign)
· Real estate taxes
· State and local personal property taxes
· State and local general sales taxes
The state and local taxes that you have paid will be found on your Form W-2. However, you can elect to deduct state and local sales taxes instead of income taxes. You cannot deduct both during the same tax year. If you want to deduct sales taxes, you can actually track all of your sales tax payments or you can use a sales tax table that the IRS provides.
If you own your home and part of your monthly mortgage amount goes into escrow to pay real estate taxes, then you can deduct that portion of your mortgage. However, keep a close on the difference between what you paid and what was actually paid to the taxing authority—only the paid amount can be deducted.
You can deduct mortgage interest for your main home or your second home. Your main home is considered your primary residence, or where you spend most of your time. It cannot be a house in progress or an otherwise unfinished residence—it must have working toilets, sleeping facilities, and cooking facilities. The second home can be virtually any other residence that you want to consider your second home. You do not have to use the home, but there are certain restrictions if you rent the home out.
Mortgage points represent prepaid interest, so they can be deductible with your home mortgage interest payments as well. If you can deduct the full amount of your mortgage interest, then you should also be able to deduct the full value of your mortgage points. There are certain debt limitations that can prohibit you from taking advantage of this deduction, however.
A mortgage interest credit is also available in some situations. Speak with your Alexandria, VA tax preparer for more information.
You can also include gifts to charity as an itemized deduction. These gifts must be to certain types of organizations, and you should maintain a records of every gift provided to a charity. You can deduct for cash contributions as well as property contributions. The property value is the fair market value at the time that it was donated, not what you paid for the property when you received it.
You can also take deductions for:
· Mortgage insurance premiums
· Investment interest
· Casualty or theft losses
· Unreimbursed employee expenses (travel, union dues, job training, etc.)
· Tax preparation fees
· Safe deposit box fees
Some of these deductions are subject to certain limitations. The Goldberg Tax Practice can help you determine which deductions you can take and whether itemizing is the best option for you. Click our profile link below to find out more or use the Contact button to get started.
