5 Tax Deductions To Double Check
DENVER (CBS4) – The tax laws change so often it’s hard to keep up without the help of an expert. I am not an expert, but I’ve wondered about this topic so often, I did a little research. Turns out there are lots of misconceptions about certain types of deductions. Here are five of the most common ones that could cost you more than you save if you get audited.
1. Just because you use your car for business or have your company logo on it does not mean your car, mileage, repairs, etc. are deductable. You can only deduct the cost of operation for business use. There is very specific tax law on these deductions. The same goes for work uniforms and cleaning — the clothes must be suitable only for work in order to be deductable. Find more on what you can and can’t deduct in terms of your vehicle: http://www.irs.gov/taxtopics/tc510.html
2. Moving expenses: This is also tricky. You can only deduct “reasonable” moving costs for a work-related move. Your move must pass two tests — the distance test (at least 50 miles) and the time test (must live and work in new location 39 weeks in the first 12 months). Meals are never deductable. The IRS guidelines on moving deductions: http://www.irs.gov/taxtopics/tc455.html
3. Home improvements: Other than energy efficiency upgrades, home improvements aren’t usually tax deductible in the typical sense, however certain improvements (new roof, addition, remodel, etc.) might be applied to your tax basis when you sell your home. In effect, this decreases the taxes you pay on any profit from the sale. Which improvements should you track for this purpose? Read more at: http://turbotax.intuit.com/tax-tools/tax-tips/Home-Ownership/Home-Improvements-and-Your-Taxes/INF12010.html
On a related note, homeowners dues are rarely deductible, unless property taxes on common areas are rolled in and itemized on your bill. Meanwhile, private mortgage insurance is deductible, but you’ll want to check the income requirements.
4. You might be surprised by how many taxpayers try to write off Rover’s flea treatment or a little nip and tuck for themselves. Make sure you know which medical costs the IRS recognizes. Care for your pet (service dogs excepted), health club memberships, non-prescribed diet plans, most non-prescribed elective cosmetic surgery, maternity clothes, hair removal, hair transplants, and life insurance premiums are among the items that are not deductible. But you also may be surprised by what is deductible, such as false teeth and acupuncture. We all have different opinions about what constitutes “medical expenses” so here’s the official description to help you decide: http://www.irs.gov/taxtopics/tc502.html
And another good article on the subject:
5. Legal fees: Most personal legal fees are not deductable. Legal fees for your business or tied to keeping your job can fall under deductable business expenses. You have to be able to prove that, without the legal services, there would be a loss of business. So in most cases, items such as estate planning do not qualify.
More IRS information on business deductions:
And some helpful info for small business owners:
Of course, the best way to decide if your deduction is above the line is to talk with a tax professional — which I am not, I might add. If you use software like TurboTax you can find valuable information on that website, as well. Most tax experts would recommend erring on the conservative side.
Meanwhile, if you have documents to get rid of, Staples is offering free shredding through the end of February. Bring in up to 5 pounds of bank statements, tax returns and more — Ends Feb. 29.
Good luck on your prep!
About The Blogger
– In her Brooke’s Bargains blog Brooke Wagner writes about finding bargains and saving money for her family. She calls it one of her favorite hobbies. Blog entries cover everything from the latest steals, deals, and freebies to cheap family activities, saving for college, and what to buy right now. Tweet Brooke your ideas at @BrookeCBS4.