Smart taxpayers know deductions can cut a tax bill.Smarter taxpayers develop their tax deduction 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.
Many medical costs to considerThere 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 use your medical deductions up to that ceiling. Mileage to and from medical treatments count, as do insurance payments from already-taxed income and treatments your insurance didn't cover, such as an extra pair of eyeglasses or hearing aids and and even artificial limbs.
Special medical needsDo 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 dog, Fido's cost is deductible, too.
Even some home remodeling might be just the prescription for a tax break, as long as you follow your doctor's orders and the IRS' rules. If you need, for example, to add a chairlift to get up and down the stairs, this generally is considered a legitimate expense. Here are a host of other deductible projects that make a house more accessible for a handicapped resident or individual with chronic medical problems.
- Adding ramps.
- Widening doors and hallways.
- Lowering counters and cabinets.
- Adjusting electrical outlets and fixtures.
- Installing railings, support bars and other bathroom modifications.
- Changing hardware on doors.
- Grading exterior landscape to ease access to the house.
A word of warning, however: Elevators generally aren't deductible. The IRS considers this a structural change that could increase the value of your house and therefore doesn't allow it as a medical deduction.
Yes, there are some good taxesSome taxes really do come in handy. Many state and local taxes can be deducted on your federal return.
The types Uncle Sam lets you write off include income, sales and real estate taxes on your home. On 2009 returns, some of these deductions are available to taxpayers who claim the standard deduction instead of itemizing, including the deduction for sales tax you paid on a new vehicle.