Each year at tax time we look to see how we can reduce our tax bill. Anyone who has filed a return for more than a few years is well aware of the usual suspects, the most common itemized deductions that hit our Schedule A – Mortgage Interest, State Income Tax, Real Estate Tax, and Charitable Donations.. Today, let’s look at the tax deductions that are frequently missed and see if we can save you just a bit more on your 2012 return.
Points – You may know that points you pay on a mortgage to buy a home are deductible. On a refinance, however, the points are taken over the life of the loan. What’s often missed on a subsequent refinance, you should then take the remaining dollar value of points from the prior refinance.
Rent – Can’t be deducted on your Federal Tax Return, but a number of states allow for a partial deduction.
State Sales Tax – This deduction has been available for only a few years, and is most welcome to those who live in a state with no income tax. The IRS allows you to choose between an amount based on income, or actual sales tax paid, which can be substantial if you’ve made some high ticket purchases.
Charitable Donations – Did you know that if you volunteer for a charity that, in addition to cash or goods donationated, you can deduct 14 cents per mile that you drive to help the charity out. For those who support a food bank with weekly visits, for example, this deduction can add up over the year. Be sure to keep notes for the dates you volunteered and the miles driven each day.
Are you a Teacher? Keep your receipts if you’ve purchased any supplies for your classroom. You can deduct up to $250 even for those who don’t itemize.
Medical Expenses- Tax deductions to the extent they exceed 7.5% of your Adjusted Gross Income (AGI). Some items that are easily missed: mileage – a deduction of 23 cents per mile for medical purposes. For those who have frequent visit to the doctor or clinic, this can add up. Equipment for disabled individuals, including items such as crutches, walkers, and orthopedic shoes. Any changes you make to your home to accommodate an elderly or disabled person is deductible less any value such renovation adds to the house.
Energy Saving Home Improvements – a number of improvements made in 2012 count toward the Residential Energy credit. Included are such items as energy efficient windows, doors, and roof. Also on the list is insulation, and new heating or central air conditioning. We’ll discuss this in greater detail in an upcoming article, so you’ll be an expert on this topic.
Credit for Retirement Savings Contribution – Couples filing jointly with an AGI up to $57,500, or Singles up to $28,750 can receive a credit up to $1,000 per person if they make a contribution to an IRA account during the year. The amount varies based on income, and the credit itself can be as high as 50%, a great motivation for lower income earners to find spare cash to fund their IRA.
TurboTax will ask you the necessary questions so that you get these tax deductions and credits if you’re eligible. If you have questions, remember only TurboTax allows you to speak to tax experts who are CPAs, IRS enrolled agents, and tax attorneys.