Tax Tips - Itemized Deductions

This is the time of year we like to start sending out some tax tips.  Following are some itemized deductions some you may know however you may learn some new ones today.   

Charitable
      ·        Contributions to a qualified charitable organization are deductible.
      ·        The amount of deduction is limited to a percentage of the taxpayer’s adjusted gross income, usually 50%, with a special rate of 30% on certain capital gain property.
      ·        You can check qualified charitable organizations on www.guidestar.org.
 

Medical

      ·        Qualified medical expenses can be deducted in the year paid.
      ·        Only the expenses above 7.5% of adjusted gross income are deductible.  The percent goes up to 10% in 2013.
      ·        If you are unsure whether an expense is deductible, give us a call 501.753.9700 or visit the IRS website

 

Taxes

       ·        Taxes not directly related to a trade or business may be deducted, including:
                  o   State, local, or foreign real property taxes.
                  o   State, local, or foreign personal property taxes.
                  o   State and local income taxes or state and local general sales tax.
        ·        Amounts are deductible in the year paid, not in the year assessed.

 

Interest

·        Interest paid on a taxpayer’s primary residence for a mortgage or home equity loan are deductible, up to $1.1 million of indebtedness.

·        Mortgage and home equity loan interest is also deductible on one other home, such as a vacation home, as long as it is not rented out.

·        Personal interest, such as interest on credit cards, is not deductible.

·        Investment interest expense is deductible to the extent of net investment income.

 

Miscellaneous itemized deductions

Some miscellaneous itemized deductions are only deductible for the amount that exceeds 2% of adjusted gross income, these include:

o   Unreimbursed employee expenses that are:
     §  Incurred and paid during the tax year,

     §  Incurred as an employee for carrying out your trade or business, and

     §  Ordinary and necessary.

o   Tax preparation fees.

o   Hobby expenses to the extent of hobby income.

o   Safe deposit box fees.

 

The following miscellaneous itemized deductions are not subject to the 2% floor:

o   Casualty and theft losses from income-producing property.

o   Gambling losses up to the amount of gambling winnings.

o   Amortizable premium on taxable bonds.

o   Impairment related work expenses for people with disabilities.

 

If you have any questions about the deductions listed above please e-mail kelly.phillips@bellandcompany.net.