What Types of Tax Deductions are There?
There are several types of tax deductions: - Casualty and Theft Losses
- Charitable Contributions
- Interest
- Medical and Dental Expenses
- Miscellaneous Itemized Deductions
- Taxes
What Is Considered a Casualty or Theft Loss?A Casualty or Theft Loss occurs when you lose personal or business property due to a casualty, such as a fire, flood, or tornado, or theft or other similar event. If you have insurance for your damaged property, a deduction cannot be taken on your tax return unless you file an appropriate insurance claim for compensation. If you have insurance, you must file a claim, even if you expect no compensation. There are some casualty and theft losses which are not tax deductible. How Do Charitable Contributions Work?Provided you make a charitable contribution to a qualified organization, you can claim a tax deduction if you itemize your tax deductions on your tax return. The total tax deduction on your tax return cannot exceed half of your adjusted gross income. Any excess charitable contributions may be carried forward for the next five taxable years. How Does Interest Qualify as a Tax Deduction?
To deduct interest on your tax return, you must have paid off a debt and have been legally liable for the debt. You must also itemize your tax deductions. There are six categories of qualified interest tax deductions: 1. Personal Interest
2. Investment Interest
3. Business Interest
4. Student Loan Interest
5. Home Mortgage Interest
6. Passive Activity Interest
Are all Medical and Dental Expenses Deductible?
Most medical and dental expenses paid for the diagnosis, cure, relief, treatment, or prevention of disease, and for treatments affecting any part or function of the body are deductible. There are specific reasons allowed for the expenses such as the alleviation or prevention of a physical or mental defect or illness. Deductible expenses include birth control pills, hospital service fees, and medical service fees. Non-deductible expenses include cosmetic surgery, health club dues, and diaper services. What Sort of Deductions are Included in Miscellaneous Itemized Deductions?Certain employee expenses, income production expenses, and other expenses are considered miscellaneous itemized tax deductions. There is usually a 2% limit on the deductions. Thus, you can deduct the amount left after subtracting 2% of your adjusted gross income from the total. Examples include union dues, employee home office expenses, and work clothes and uniforms. How Are Taxes Deductible?Some non-business type taxes are deductible. These fall into three distinct categories: 1. Personal Property Tax
2. State, local, and/or foreign income taxes
3. Real Estate Tax
The tax must be charged to you and must have been paid during the taxable year. Do I Need a Lawyer to Help Me with My Income Tax Problem?Tax law is a very complicated and frustrating subject. To make matters worse, tax law changes every year. An attorney can help you understand current tax law and how it affects your income tax problem. If you have questions regarding the deductibility of your expenses, or you need to go to tax court, a lawyer can represent you and help minimize your income tax bill. |
