10 Commonly Overlooked Tax Deductions
Here's some help for this tax season.
You have a duty to pay taxes, but you don’t have a duty to pay more than you owe. And you only owe the amount that shows up on line 76 of your 1040 after you take all the deductions (and credits) you’re allowed by law.
What follows is a list of deductions you can’t afford to overlook.
But know this: All of them are subject to certain rules and limits not discussed here and many of them are worth nothing to you if your total itemized deductions don’t exceed $11,900 (for those married and filing jointly); $5,950 (for those filing separately); or $8,700 (for those filing as head of household).
Casualty and Theft Losses
Yes, it hurts when you lose a favorite necklace, or when a burglar palms your coin collection. It hurts even more if you lose everything in a Sandy-like natural disaster.
You can take some of the sting out of those losses by deducting them. You’ll need to document your losses, and some of the rules are tricky, but where there’s a loss, there’s generally a way to deduct it.
Federal Estate Tax on Income in Respect of a Decedent
You know that income from the IRA or pension you inherited from your dad (or mom or grandmother)? That’s income in respect of a decedent.
And because his estate may have paid estate tax on it, you may be able to deduct that tax on your income tax return. Go figure.
Family Planning and Fertility Treatments
Did you take a pregnancy test at home? Deduct the cost of the kit. Did you purchase birth control pills prescribed by your doctor? Deduct that, too.
What about purchasing a breast pump, or paying for fertility treatments or a vasectomy? You guessed it — that’s all deductible, too.
IRA Administrative Fees
If you pay your IRA fees out of your IRA account, you lose two ways: The account has less money to grow tax-deferred, and the fee isn’t deductible.
Pay the fee out of pocket and you’ve solved both of those problems.
Student Loan Interest Paid by Your Parents
So here’s the deal: When your parents pay your student loans, the IRS treats the interest they pay as a gift to you.
Thus, since it’s therefore really your money that paid the interest, you get to deduct it—if your parents don’t claim you as a dependent on their income tax return.
It gets better: You don’t even have to itemize to take this deduction!