Tax payers have two options for tax deductions - itemized or standard. 2 out of 3 choose standard as it is both easy to file and allows a 1040-EZ short form to be filed. If you want to itemize when you fill out your tax form, it cannot be the 1040-EZ that you submit, but a Schedule A.
If your itemized deductions are higher than the level acceptable for your filing status, that amount can be claimed as itemized deductions. It makes more sense for homeowners to itemize their deductions as the combined real estate tax and home mortgage interest deduction will be higher than the standard deduction's total. There are additional deductions that can be added to the itemized list.
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As long as medical and dental expenses exceed more than 7.5% of your adjusted gross income (AGI), they can be deducted.
An example of this is if you have medical expenses of ,000 and your AGI is ,000, ,500 can be deducted from Schedule A as that equals the overage of your expenses.
If, however, your bills are ,000 and yet your AGI is 0,000 nothing can be claimed as you have not reached the limit. This is how it works: your medical bill is ,000 - ,500 (this is 7.5% of the 0,000) comes to -,500.
In addition to the real estate deduction, it is also possible to deduct personal property tax. This will not apply to everyone as not all states charge this. In order for this to be done, the tax must be imposed each year and be based on the value of the item.
Things you can't deduct are car and pet insurance, FICA, federal income taxes that have been paid, social security, and Medicare payments, Federal, Estate, and Unemployment tax, customs duties, and gift taxes.
Charitable donations can be claimed but always make sure you fill in the form correctly. Cash deductions must be proved by a check receipt or letter from the charity, while non cash items can be claimed at a reasonable market value if you had sold them, providing they are still in good condition. The only exception allowed for the items not to be in good condition is if they are worth more than 0. Jewelry and stock does not apply, nor to paintings as they are hard to put a price on. Again, the charity needs to confirm the item and send a receipt giving their address, charity details, and the item donated. If the value is 0 or more, check IRS Publication 536 for more information.
Casualty and theft loss can be deducted if you are affected by fire, tornado, flood or earthquake, plus loss by theft can be deducted (check IRS Publication 584). Work related expenses can also be deducted as long as they are necessary for the job and can include items such as work clothes or tools, periodicals relating to your industry, and fees or exam costs relating to your employment. Check IRS Publication 529 for more details on this. If you are looking for employment elsewhere, costs of posting and printing resumes can be deducted.
Job expenses have a 2% limit and like medical expenses, have to hit a certain level before they apply. If the AGI is ,000, there would need to be 0 to be reclaimed. So with an AGI of ,000 if there was 0 of expenses, 0 could be deducted.
Miscellaneous deductions also have a 2% limit and will cover things such as safety deposit box fees and tax preparation costs.IRS Publication 529 goes more into details about these. When filling in forms, it is best to check both scenarios and see which one benefits you the most.
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