Tax Miniseries 2016 - Part 3

Tax Miniseries 2016 index:

If you're like me I'm sure you've wondered how you actually qualify for deductions. Or why even though I added several deductions they didn't seem to make any real difference whatsoever to my tax refund. There are many commonly overlooked deductions that can be added to take maximize a refund. Just note that deductions will only be best if, and only if, your deductions are larger than the standard deduction you take for your filing status. Some commonly overlooked deductions are:

  • Church and charitable contributions
  • Cash contributions
  • Non cash contributions
  • Unreimbursed business expenses
  • Mortgage Interest & Property Tax
  • Personal property taxes
  • Casualty, theft or loss
  • Out of pocket medical
  • Public service retirees 

Church and charitable contributions are pretty much self explanatory. Church contributions will normally have an end of year tax form given to members to show what they have donated for the year and that amount is tax deductible. Cash and non cash contributions are similar and can be given to any non profit organization that has a valid non profit IRS status. In most cases cash contributions aren't the easiest to keep track of so make sure receipts are collected from the organization. Non cash contributions are items such as clothes or furniture donated to an organization. Those contributions are normally given a fair market value as defined by the IRS and can be deducted at those values. Unreimbursed business expenses such as uniforms required for work, mileage required by work for business that is not normal transit to and from the office or union dues. Any item that is common, helpful for the business and appropriate for the field can be deducted. It must be noted though, that if your employer reimburses any of those expenses they are no longer eligible.

 

Mortgage interest & property taxes are somehow forgotten from many people's taxes. I know what you're thinking "how is that possible?" I'm guessing in the haste of filing they are just overlooked. Simply put, interest paid on your mortgage loan and property taxes paid (I believe through escrow, not 100% sure about direct tax payments) are deductible and normally for a large amount. This will soften the blow of being a responsible homeowner when you look back at a several thousand dollar deduction. Personal property tax is something that some states pay and is deductible by some states. For example, in Virginia taxes are paid on personal property such as a car and is tax deductible.

 

Casualty, theft and loss as well as medical expenses are overlooked mostly because they are a little less common. For either of the deductions to be in effect the realized loss in payment must be greater than 10% of a filer's adjusted gross income. For example if a homeowner had a flood and insurance didn't cover the entire payment any remaining balance that exceeds 10% of a payer's adjusted gross income is eligible for a deduction. The same situation applies for medical payments. Many people don't reach that threshold so those deductions are commonly brushed over. Certain public service retirees such as firefighters or police can deduct $3,000 from their taxable income based on medical contributions. It's a limited program but it a deduction nonetheless.

This list does not include all deductions just ones that many tend to overlook when filing taxes.