Three Commonly-Missed Tax Deductions
The sad fact is, people are not able to take advantage of all legal tax deductions simply because they don’t know that these exist. In most cases, they only learn about these deductions soon after they have filed the return while in the middle of a chat with a friend or co-worker. This situation is understandable because it’s quite impossible for taxpayers to take note of all legal tax deductions, let alone tax laws that are outlined by the IRS. The fact that people attempt to make use of absurd tax deductions makes matters both worse and depressing. Still, there are many deductions that are left unexplored and this write-up outlines three of them.
First, be sure that you reflect in your tax return any donation, other than cash, given to a charitable organization. This includes those items that were paid using your credit card. Bear in mind that the deduction must be claimed on the year the donation was made, and not when the credit card charge was finally paid.
You must also secure from the non-profit organization a written receipt of the donations that you have given to them. You may also ask your credit card provider to give you the transaction record for charged donations. Be aware though that this type of deduction also covers actual items donated. Therefore, deciding to donate furniture and old clothes is certainly a good idea as you’ll be entitled to a tax deduction on this, to some extent. Just do not forget to get proof of the donation so you don’t have any trouble supporting your claim and claiming for the necessary deduction. Also, make sure that items given to charitable institutions are in good condition or the IRS won’t consider this move as something that will merit a tax deduction.
You may also deduct a certain portion of the new points earned as a result of refinancing your home. If on June 1st you have refinanced your home for a 20-year term, you may actually claim for deductions equivalent to 7 (June 1 – December 31) of the 240 months. If the new points require you to pay $2,400 for the whole term, you may actually deduct $70 for that year, or $10 for each month. In the same manner, until the $2,400 will be completely paid, you can deduct $20 per annum within the 20-year term.
This kind of deduction is often forgotten by people simply because of the specific requirements that need to be met. As soon as you fulfill certain criteria, you can actually deduct your health insurance premiums from your total taxable income. Yes, instead of paying for them, you may deduct health insurance premiums depending on how old you are. This stipulation even includes premiums related to long-term care. Just do not forget to add these to your total account of medical expenses. That total must also be over 7.5% of your AGI, your adjusted gross income, before you’ll be able to claim the deduction or tax benefit.
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