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Remember when you used the 1040 EZ to file your taxes? Even though it only took 10 minutes to fill out the form, I sent it in late every year. Then I graduated from college, got married, bought a house, had a kid, bought another house, had another kid, and started a business. Even though I itemized, I always missed one or two common federal income tax deductions. Then I hired an accountant who helped me find every last deduction.
I now share them with you.
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Schedule A: Common Federal Income Tax Deductions
Don't assume the standard deduction is more than your itemized deductions. The following deductions are available on Schedule A:
- Mortgage Interest: If you own a home you can probably itemize. At the very least, fill out Schedule A and find out.
- State and Local Taxes: You can choose either to deduct state and local income taxes or general sales tax, but not both. If you bought a lot of really expensive stuff last year and saved the receipts, you could be in for a nice deduction. Don't worry if you didn't save receipts; the IRS provides a standard deduction for general sales tax.
- Real Estate and Property Taxes: If you're like me, you're really excited that the value of your home went down in 2008 and your property taxes went up. Deduct your property taxes and be grateful.
- Personal Property Taxes: Deductible personal property taxes include personal property such as a boat or car. The tax must be charged to you on a yearly basis.
- Medical and Dental Expenses: Unreimbursed medical expenses that exceed 7.5% of your adjusted gross income can be deducted on Schedule A.
- Gifts to Charity: If you lie about charitable donations, you will burn in hell or suffer its equivalent, an IRS audit. Don't forget to itemize non-cash contributions.
- Casualty and Theft Losses: You may deduct unreimbursed losses caused by a sudden, unexpected, or unusual event. to your home, household items, and vehicles.
- Job Expenses: Union dues, cost of a job related move, and work clothes not suitable for every day use are the most common job expenses reportable on schedule A.
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Common Federal Income Tax Deductions Not on Schedule A
You don't have to itemize to take advantage of common deductions. Here's a list you should be aware of:
- Traditional and SEP IRA Contributions: Because traditional and SEP IRAs are funded with pretax dollars, any post tax contribution is deductable. Because 401 (k) contributions are deposited before federal income taxes are taken, they do not usually qualify as a tax deduction. Because Roth IRAs are funded with post tax dollars, contributions are not deductible.
- Business Expenses
- Student Loan Interest: Student loan interest, up to $2500 on qualified loans, is deductible.
- Educator Expenses: Public school teachers can automatically claim up to $250 worth of deductions for classroom supplies.
- Child Care Credit: If you pay someone to take care of your kids so you can work, you may be eligible for a tax credit.
- Higher Education Credits: You may qualify for the Hope or Life Time Learning Credit if your adjusted gross income is below $65,000.
- First Time Home Buyer Tax Credit: This is more of an interest free loan than a tax credit. Individuals who purchased their first home after April 8, 2008 may be eligible for up to a $7500 credit.