By A.J. Gross, C.P.A., E.A.
Joy to the world, tax time is just around the corner. I know you are excited. Ok, probably not. We CPAs and accountants are a unique breed. We get excited to work every day and night for three months straight to get everyone’s tax returns filed on time. Filing taxes is a necessary evil. It is best to prepare for tax time by reviewing your itemized deductions in December. You may be able to gather additional deductions before the year ends. The following is a list of itemize deductions.
Medical – You can claim medical expenses not covered by your health insurance. This includes out of pocket costs such as co-pays, dental costs and vision care. The amount you can claim is limited. The limitation is 10% of your Adjusted Gross Income. If you earn $50,000 a year, multiply 50,000 by 10%, which equals $5,000. Your out of pocket medical expenses must be greater than $5,000 to get a deduction.
Taxes – This includes sales or state tax, real estate taxes, and personal property tax. The cost to renew your Michigan license plates is a personal property tax. If you bought a new car, keep track of the amount of sales tax paid.
Interest – Mortgage interest, mortgage insurance premiums, investment interest, and points paid to secure a mortgage.
Charitable contributions – Cash or gifts given to charities or churches.
Casualty and Theft Loses – You may have a deduction if you incurred a significant loss. Examples are fires, earthquakes, floods, hurricanes, vandalism and theft. You can claim unrecoverable costs. The deduction is limited. The main limitation is 10% of your Adjusted Gross Income. The calculation for the limitation is similar to the medical expense limitation.
Job Expenses and Miscellaneous Deductions – You may be able to claim a deduction for out of pocket expenses not reimbursed by your employer. This may include travel, union dues and job training. Miscellaneous deductions include tax preparation fees, safe deposit box, and other investment costs. The deduction is limited to 2% of your Adjust Gross Income. If you earn $50,000 a year, multiply 50,000 by 2%, which equals $1,000. Your costs must be greater than $1,000 to get a deduction.
Other Itemized Deduction – The main other itemized deduction are gambling losses.
IRS Circular 230 Disclosure: To the extent this writing contains advice on a federal tax issue, the advice is not intended to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed in this communication.
A.J. Gross, C.P.A., E.A. is President of ALG Tax Solutions. A.J. Gross can be contacted at AJGross@algtaxsolutions.com or www.ALGTaxSolutions.com.
This was printed in the December 15, 2013 – December 28, 2013 Edition
