One small advantage of paying taxes is claiming tax credits and deductions; you give with one hand and take with the other one. After all, this is what Uncle Sam does, and if you get the slightest opportunity to claim some sort of tax break of relief in your overall tax liability, take it and run with it.
The availability or value of a tax credit or deduction is dependent on the value of your Adjusted Gross Income (AGI). However, most of the itemized tax deduction approval amounts are based on the percentage of your AGI. Here are some of the common expenses you must never overlook:
Medical Expenses: The medical and dental expenses are the first ones on Schedule A. But, most itemizers don’t claim this deduction because the expenses must surpass 7.5% of your AGI to claim, which is not always easy to meet. To help meet this threshold, consider the following:
· Travel expenses to and from the medical facility or even chemists to collect your prescriptions. Find out the allowable mileage rate before calculating the expenses.
· Payments to your insurance plans from your taxed income. This includes a percentage of your long-term premiums
· Health-related expenses like extra glasses, hearing aids, artificial limbs and some dental treatment.
· Alcohol or drug addiction rehabilitation and related expenses
· Doctor-recommended weight loss program
· Laser vision corrective surgery
This is a very broad category and might include expenses like home renovations for use if wheelchair or even a physician-recommended humidifier that you had to add to the home’s HVAC system to lessen your child’s asthma. Just remember to keep necessary documents and receipts, as it is possible the IRS will ask for them. Read the IRS Publication 502 for a more comprehensive list of eligible medical costs.
Work Related Expenses: You can deduct work-related expenses that weren’t refunded by the employer on Schedule A and miscellaneous expenses if they exceed 2% of the AGI. Qualified expenses include job search expenses, expenses linked to your investments, and even tax preparation costs. Read the IRS Publication 529 for more information on miscellaneous expense deductions.
Charitable Deductions: This is one of the leading itemized deductions but you have to be careful if you are so generous because there are some limits on how much you can donate to charities or groups. You can give up to 50% to nonprofits listed in the IRS 501(c)(3) like churches, education organizations, hospitals and other organizations that rely on the public or the government to fund their operations.
Some of these deductions are a bit complicated and you might require the professional input of a tax pro to successfully claim them on your return.