13

Welcome to Wealth Informatics! If this is your first time visiting the site, please start here.

Are you getting all the tax deductions you are eligible for? (updated for 2013)

Tax deductions that are easily overlooked. Updated on Feb 5, 2014 for 2013 tax year.

I really like tax software – Turbotax or H&R Block. I have been using them for doing my taxes for 8 years now. I wavered from the norm only one year, 2007, the year I got married, moved to a different state mid year, got a new job, started giving to charities and started saving for retirement. I thought all of this warranted a “professional” tax preparer.

I should have gone to a CPA, but as no one I knew was using an accountant I couldn’t get a referral and thought the H&R Block tax professional would be our best bet. A very, very bad decision. All she did was use the same software that we can get and filled the boxes without asking too many questions. Later I found out that she didn’t get much money for filing a straight forward return, but the real money was in selling the tax anticipation loans.

Anyway, the point is, she missed almost every single deduction we were eligible for. She assumed a whole lot of stuff. When she said she was going to take the standard deduction, I suggested we would like to itemize our deductions. She laughed saying that without a home payment that is pointless… umm… how about charitable donations, state income tax and other deductions?

Either she didn’t know much herself or she really thought we were a waste of time and wanted to our return over and done with. She even had us paying taxes in both states for the full income without taking a deduction on each other. After spending 4 hrs every single day of the week going to H&R Block, I redid it by hand and it was an excellent exercise. I feel everyone should do it at least once :)

Reading those IRS publications were eye opening to say the least. Almost everyone uses an accountant or software to do their taxes these days. But no one other than me would know what my personal situation is to take all the deductions I am eligible for, which brings me to this list of 2011  tax deductions that could be easily overlooked. Go through them and make a note of all the deductions you are eligible for – as a discussion list for your CPA or list to keep an eye on when you use software.

Tax Deduction checklist - easily overlooked tax deductions

Medical Tax Deductions

  1. Alcoholism and drug abuse treatment
  2. Contact lenses, eyeglasses, and hearing devices
  3. Contraceptives, if bought with a prescription
  4. Hospital services fees (laboratory work, therapy, nursing services, and surgery)
  5. Impairment-related work expenses for a disabled individual
  6. Lead paint removal
  7. Long-term care insurance premiums
  8. Transportation expenses for trips to medical facilities or doctors’ office
  9. Nursing home medical expenses
  10. Lodging expenses incurred for medical reasons while away from home
  11. Health insurance premiums if self-employed
  12. Special equipment for the disabled

For more 2010 tax deductions based on medical expenses look through this FSA eligible expenses. If you have not claimed them in your FSA, you can add them up and claim them in your taxes.

Business Tax Deductions

  1. Cell phones or pagers required for business
  2. Cleaning and laundering services while traveling for business
  3. Depreciation of computers
  4. Dues to labor unions
  5. Education expenses to maintain or improve your skills
  6. Employee contributions to a state disability fund
  7. Employee’s moving expenses
  8. Fifty percent of self-employment tax
  9. Personal liability insurance for wrongful acts as an employee
  10. Protective clothing or uniforms required at work
  11. Subscriptions to professional journals and newspapers
  12. Trade or business tools with life of 1 year or less
  13. Expenses for job seeking in your current field, including fees for resume preparation and employment agency fees
  14. Reservist and National Guard overnight travel expenses

[Note: You cannot deduct expenses that are reimbursed by your employer] Check out this Small Business Tax deductionarticle on more information about business related tax deductions.

Home & other property Tax Deductions

  1. Commissions and closing costs on sale of property
  2. Rental management fees & Commissions if you rent your home out
  3. Improvements to your home
  4. Mortgage prepayment penalties and late fees
  5. Points on a home mortgage and certain refinancing
  6. Real estate taxes associated with the purchase or sale of property
  7. Seller-paid points on the purchase of a home
  8. State personal property taxes on cars and boats
  9. Casualty or theft losses

Charitable Tax deductions

  1. Appraisal fees for charitable donations or casualty losses
  2. Appreciation on property donated to charity
  3. Out-of-pocket expenses relating to charitable activities including the standard mileage deduction
  4. Cost of meals, accommodations, public transportation and gas when you have to travel for the sole purpose of volunteering and you are not reimbursed for that.
  5. All the household goods, clothes and other stuff you donated at Goodwill, Salvation Army or any such places.

Finance related Tax deductions

  1. Accounting fees for tax preparation services and IRS audits
  2. Amortization of premium on taxable bonds
  3. Fees for a safe-deposit box to hold investments (e.g., stock certificate)
  4. Foreign taxes paid
  5. Investment advisory fees
  6. IRA trustee’s administrative fees billed separately
  7. Margin account interest expense
  8. Penalty on early withdrawal of savings
  9. Worthless stock or securities
  10. Theft or embezzlement losses
  11. Legal fees incurred in connection with obtaining or collecting alimony
  12. And the alimony itself

Other

  1. Federal estate tax on income with respect to a decedent
  2. Gambling losses to the extent of gambling winnings
  3. Special schools and separately stated fees for medical care included in tuition
  4. Foster child care expenditures
  5. Jury duty pay reimbursed to employer

Blogging/Online business Expenses

These expenses are a little different than the traditional small business. I started listing the possible deductions for this category but it became too long, so I extracted them into a different post - More than 50 tax deductions that a blogger or an online entrepreneur .

Have I missed any easily overlooked tax deduction? Do you know what all deductions/credits you are eligible for and double check if you have actually claimed them after the software or your accountant do your taxes? Or do you trust they will know better? I might trust my accountant if I have been using them for a while and know that they are good, but after the H&R Block “accountant” fiasco, I always, always double check my taxes even if I do it via the software. What about you?

Previous post:

Next post: