Smart taxpayers know deductions can cut a tax bill.
Smarter taxpayers develop their deductions strategy early, getting the most out of the tax breaks and avoiding filing-deadline panic.
Figuring out which deductions can help you is important because they aren't dollar-for-dollar tax-reduction tools. They can only cut your taxes on a limited basis by reducing your taxable income. Less income equals less tax.
That means every bit that reduces your taxable income is critical to cutting your final payment to Uncle Sam -- or getting a bigger refund. If you're going to add up your deductible expenses, add them all up on your Schedule A, especially since many deductions require you to reach a certain level before you can use them.
Tax-savvy filers know that some useful deductions get overlooked in the last-minute rush to find ways to cut a tax bill. So now, with plenty of time to spare, here are some itemized deductions you may have forgotten about.
There is never anything good about being sick, but don't add to your ailments by overlooking medical costs that you can deduct.
Since total medical expenditures must be at least 7.5 percent of adjusted gross income, many taxpayers don't even bother with this one. But there are ways the Internal Revenue Service says you can get this deduction up to that ceiling.
Medical costs to consider
- Count travel expenses to and from medical treatments. Each fall, the IRS adjusts standard mileage rates. For 2007 returns, the rate is 20 cents per mile; it is 19 cents per mile for allowable medical travel in 2008.
- If you made insurance payments from already-taxed income, add it in here. This includes the cost of long-term care insurance, up to certain limits based on your age.
- What about things your insurance didn't cover, but you needed anyway? This is where you can recoup some of their costs. This includes an extra pair of eyeglasses or set of contact lenses, false teeth, hearing aids and artificial limbs
- The doctor told you to get that humidifier to help relieve your chronic breathing problems. That means the device -- and additional electricity costs to operate it -- could be at least partially deductible.
- The IRS also has deemed that costs for programs to help you kick the smoking habit are medically deductible, as are weight-loss programs undertaken at a physician's direction to treat an existing ailment such as heart disease.
Special medical needs
Do you have special needs? The medical-deductions section of your tax form is also where you account for the cost of a wheelchair, crutches and equipment that enables a deaf person to use the telephone or that provides television closed-captioning.
If you purchase a hearing or Seeing Eye guide dog, Fido's cost is deductible, too.