When tax time rolls around, most people look for every possible way to shave a little off their taxable income. You can claim the standard deduction -- $6,200 for a single taxpayer in the 2014 tax year -- or you can keep careful track of all the things you spend money on during the tax year. If they qualify as itemized deductions and if they total more than the standard deduction available to you, you can file Schedule A with your return and claim them instead.
The tax code recognizes several categories of itemized deductions. Some are available only to the self-employed, but a good many can be claimed by the average taxpayer. Medical expenses are one of these categories. If you pay health insurance premiums with after-tax dollars, they’re deductible. Your co-pays are deductible as well, along with transportation costs to get care and medical equipment you must purchase for certain conditions. This can add up to a lot of money, but there’s a catch. You can only claim the portion that exceeds 10 percent of your adjusted gross income unless you or your spouse are 65 or older. In this case, you can deduct the portion that exceeds 7.5 percent of your AGI through the end of 2016.
Miscellaneous expense deductions are a catchall. Work-related expenses fall into this category, so if you have to purchase your own equipment or clothing to do your job, these costs are sometimes deductible. Professional dues are tax deductible and so are expenses you incur when looking for work. You can deduct almost any expense that allows you to earn income or make money, even a computer you use at home to manage your investments. But there’s a catch with this category, too. Most of these expenses must exceed 2 percent of your AGI and you can only claim the balance.
The IRS publishes a whole list of possible deductions on its website. Others include state and local sales taxes you pay during the year. This doesn’t just mean the nickels and dimes spent on a cup of coffee you grab on the go. It can also include major purchases like appliances or an automobile. Although a lot of rules apply, you can often deduct interest you pay on your mortgage. You can deduct charitable contributions and money you spend on dependent care if your child is younger than 13. You can claim these costs if you must pay someone to care for him while you and your spouse work, go to school or look for work. This credit also extends to other dependents in your household who are disabled and unable to care for themselves, regardless of age. For a comprehensive list of all available exemptions, check the IRS website or talk with an accountant.
Receipts and Documentation
The IRS puts the onus on you when it comes to proving the expenses you claim if you get audited. If you think you might want to itemize next year, start saving receipts for every transaction you might possibly deduct. If you’re going to deduct sales taxes, this means keeping the receipt from that cup of coffee. Larger transactions are typically easier. Your mortgage company should send you a statement showing how much interest you paid. For medical expenses and childcare expenses, you’ll probably have canceled checks, bank statements or credit card statements. The important thing is to make sure the receipts note whom you paid, how much you paid and what services or goods were provided.
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