No one likes to pay too much in taxes, so savvy taxpayers look for ways to trim their tax bill by claiming as many deductions as possible. But some get carried away, and still others get a little too creative.
If you claim these wrong write-offs, you might end up spending time with a tax auditor and paying more in taxes, penalties and interest.
Bankrate doesn’t want that to happen, so we’ve put together this list of expenses you might be tempted to claim. Don’t you dare!
We’ve also provided related tax breaks that do pass IRS muster and will lower your tax bill.
The hazard policy you bought to cover damage from fires, tornadoes, hurricanes, winter storms and other disasters, as well as for more routine mishaps, offers peace of mind. What it doesn’t provide is a tax deduction for the insurance premiums.
But if you meet some tax law guidelines, you can deduct private mortgage insurance, or PMI, on your 2016 tax return. That’s the insurance your lender requires you to buy if you don’t put down a big enough down payment.
PMI premiums are deductible as an itemized expense (it goes on Schedule A with your mortgage interest claim) as long as the mortgage insurance policy was issued in 2007 or later. The 2016 tax year is the final one for this deduction unless Congress extends it.
Your income will determine whether you can deduct all, some or none of your PMI.
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Don’t deduct a landline telephone, but …
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If you still have a landline telephone at home, you can’t deduct the cost — even if you primarily use that phone for business. The IRS says the first hard-wired phone line in your home is considered a nondeductible personal expense.
But you can deduct as a business expense the cost of business-related long-distance charges on that phone.
And if you install a second landline specifically for business, its full cost is deductible.
If you use a cellphone, determine how much often you use it for business. For example, if you spend half of your time conducting business on your phone, you may be able to deduct half of your phone expenses.
But if your wireless provider doesn’t send an itemized bill, it may not pass muster with the IRS. As with the landline, a second cellphone used exclusively for business would.
The cost of getting to and from work is never deductible. Taking public transportation or driving to work is a personal expense, regardless of how far you must travel or whether you get work done during the commute.
But you might be able to deduct some commuting costs if you work at two places in one day, whether or not for the same employer. In this case, you can deduct the expense of getting from one workplace to the other.
You also can deduct some other work-related travel expenses, such as visits to clients and out-of-office business meetings.
If you’re self-employed, these expenses would go on your Schedule C or C-EZ. If you’re an employee, travel costs must be claimed as unreimbursed business expenses. Be sure to keep good records.
You also could encourage your employer to establish a commuter savings account program. This employee transportation fringe benefit lets workers use pretax dollars to purchase mass-transit passes and pay for parking near work.
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Don’t deduct your pet, but …
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Yes, your dog or cat is a family member. And yes, some insurance companies now include coverage for Fido or Fluffy in auto policies.
But your affection for your pet or an insurer’s willingness to pay for some of your domesticated animal’s care doesn’t carry any weight with the IRS. So don’t you dare try claiming your pet as a dependent.
Yes, it has been tried. And yes, it is disallowed by the IRS when the furry facts are revealed.
You can, however, deduct as itemized medical expenses the costs of buying, training and maintaining a guide dog or other service animal to assist a visually impaired or hearing-impaired person, or a person with other physical disabilities.
You lose a lot of income each payday to Federal Insurance Contributions Act, or FICA, taxes, the money withheld from your checks to pay for your future Social Security benefits.
The debate as to whether Social Security will be around when you retire is still raging. But one thing is sure: Don’t even think about trying to deduct these taxes.
But if you overpaid this tax, you can get a credit for your Social Security overwithholding. There is a limit on how much FICA taxes can be contributed each year. In 2016 earnings up to $118,500 were subject to FICA taxes; in 2017, up to $127,200 in earnings is taxed.
If you had multiple jobs and your combined earnings exceeded the wage base, you probably had too much FICA withheld. You can claim the excess Social Security tax as a credit when you file your tax return.
If you simply are following your inner Kardashian, the IRS definitely won’t let you deduct the costs of your nips and tucks.
The IRS specifically says you generally cannot include in deductible medical expenses the amount you pay for procedures such as face-lifts, hair transplants, hair removal (electrolysis) and liposuction.
But if a surgery is medically prescribed — for instance, a nose job to treat respiratory issues — and you just happen to like the look of your new sniffer, then that’s OK. The doctor’s decision makes it a medical deduction.
The IRS says: “You can include in medical expenses the amount you pay for cosmetic surgery if it is necessary to improve a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident, trauma or a disfiguring disease.”
Looking sharp at work rests totally on your shoulders. A U.S. Tax Court ruling in 2011 reaffirmed this tax law when the judge disallowed a television anchorwoman’s deductions for tens of thousands of dollars in clothing she bought to wear on air.
But you can deduct the cost of dry cleaning or laundry of business uniforms. Under the tax code, that means attire you can’t wear anywhere else — although with the ways some folks dress today, that designation could be hard to nail down.
Also deductible are the cleaning charges for nonprofit uniforms, such as an outfit required of hospital volunteers, or Boy Scout or Girl Scout troop leaders. Here, the costs of the uniform and its maintenance would count as charitable deductions.
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Don’t deduct volunteer time, but …
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Your time is valuable, but that doesn’t matter to the IRS when it comes to volunteering at a charity.
You can’t claim the value of your wages for the hours spent helping out at your favorite nonprofit. Neither can you count as a deduction the value of a project you created, such as a poster that you, or a graphic artist, designed for the charity.
But you can deduct other costs associated with your charity work. This includes your mileage in connection with the group’s work, which can be claimed at the rate of 14 cents per mile.
You also can claim as a charitable deduction unreimbursed out-of-pocket expenses.
Keep good records. Track your charitable travel and hang on to the receipts for the poster board and special markers you bought just for the nonprofit’s poster project.
Headache and cold treatments from your neighborhood pharmacy shelves have never been tax-deductible. There was some confusion here because for a while, the IRS allowed owners of medical flexible spending accounts, or FSAs, to use money in those pretax accounts to pay for over-the-counter drugs.
That option ended when 2011 began. Now you must get a doctor’s prescription for OTC medications before the purchase can be reimbursed with FSA funds.
But you still can deduct diagnostic tests, such as store-bought tests for pregnancy and diabetic blood sugar levels.
And the IRS says moms get a tax deduction on breast-feeding supplies, including pumps and bottles, because, like obstetric care, “they are for the purpose of affecting a structure or function of the body of the lactating woman.”
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Don’t deduct overnight camp, but …
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When school lets out for the summer, working parents face a child-care dilemma: what to do with the youngsters while Mom and Dad are at the office.
Some families send the kids off to camp. That’s a great experience for the kiddos and eases, at least temporarily, parental child care concerns.
But sleep-away camps are not tax-deductible.
However, if you decide instead to keep the kids at home and simply send them to day camp during the hours you’re working, that expense could qualify as a claim for the child- and dependent-care credit.
For one child, you can count up to $3,000 of care expenses each year toward the credit. The expense amount is doubled for the cost of caring for two or more dependents.
Your actual tax credit can be up to 35 percent of your qualifying expenses, depending upon your income. Since it’s a credit, you get to use it to offset your tax bill dollar for dollar.