You Can Cut Your Income Tax Bill - income tax deductions - Brief Article

USA Today (Society for the Advancement of Education), Jan, 1999 by Jeff A. Schnepper

YEAR AFTER YEAR, thousands of people pay too much in taxes by failing to take all their deductions. The following are some of the most commonly missed ones:

Pay off any credit card debt with a home equity loan. The interest on that loan is deductible. Home equity debt is any debt secured by your house. It doesn't matter whether you borrow from your bank, 401(k), or neighborhood loan shark. The only key to deductibility is to secure the loan with your house. The money can be used to pay off your credit card debt, for vacations, or anything else you want. The interest on up to $100,000 of debt is deductible as home equity interest.

Contribute old clothes, furniture, and other items to a charity. If you contribute cash to a charity, you get a deduction. You can deduct the wholesale fair market value of non-cash contributions to your church or synagogue, Goodwill Industries, or any other qualified charitable organization. Moreover, you can deduct your mileage at a rate of 14 cents a mile if you use your car for charitable purposes. Make sure that you get a receipt. It usually just will say something like three bags of clothes without any value given, but don't leave without one. Think of that receipt as green paper with pictures of dead presidents. If you are in the 28% bracket, a $1,000 contribution of old clothes means $280 in your pocket. You wouldn't walk out of a store without your change, so don't forget your receipt.

Find that perfect job and let the IRS subsidize your search. Job-hunting expenses are deductible. If you are out of work, or even if you still are employed and looking for a new job, all of the expenses incurred are deductible as miscellaneous itemized deductions. These include--but are not limited try--resumes, phone calls, postage, and travel costs. (You can deduct 32.5 cents per mile for the use of your car.) For example, if you take a friend to lunch in an attempt to use him as a reference or referral, you can deduct the cost of the meal as a job-hunting expense.

Keep up with your investment expenses. These are allowed as miscellaneous deductions. Such expenses would include investment publications, payment for investment advice, calls to your broker, and any other expense related to the production of investment income. Rather than buy your investment newspapers and magazines at the newsstand, subscribe to them and use your check as the receipt. If you utilize your computer or subscribe to an Internet service for investment purposes, those expenses are deductible as well.

Business supplies and gifts are deductible, even if you're an employee. Pens, paper, a calculator, special tools, a computer, and even a briefcase are deductible. If your job requires you to travel, a suitcase is, too. The key is to relate the item to your business. For instance, as a writer, my computer and subscription to the on-line service I use are deductible because I utilize them in my business. If there is any doubt, have your employer write a letter saying that such items are required for your position and attach that letter to your tax return. If you are audited, the IRS may ask for such a letter. The best way to win an audit is to avoid it to begin with.

Tax-planning advice is deductible. As an attorney, my tax-related professional fees are deductible. As an accountant, my tax preparation fees are deductible. As an author, my books and other tax writings are deductible. If you are self-employed, tax preparation fees can be deducted as business expenses, potentially not only reducing your income tax, but your Social Security and Medicare taxes. If you are in the 31% bracket and you consider Social Security, Medicare, and state taxes, you can save as much as 50% or more in taxes with these deductions.

Medical expenses that include special equipment or treatment can be deducted. When my son was born, he had a hip problem for which his doctor prescribed swimming as an exercise. I could have joined a swim club and deducted the expenses. Instead, I put a pool in my backyard. If the pool cost $25,000 and increased the value of my property by $15,000, the remaining $10,000 would count as a medical expense that I could deduct. Capital expenditures are deductible to the extent their cost exceeds the added value to your property. If you have arthritis or any other medical condition that can be helped by a sauna or a whirlpool, those items then become deductible. Upkeep for these items would qualify as deductible medical expenses as well.

Deductible medical services don't have to come from your physician. If you have a condition such as a bad back and your doctor says you need a daily massage or other type of treatment from a non-medical expert, those expenses are deductible. Get a written note from your doctor saying you need those services and why as proof for the IRS. That letter, and your receipts, make it deductible.

Medical travel expenses are deductible. If you use your car for trips to the doctor, keep a record and deduct 10 cents a mile for tax purposes. Let's get creative. It has been established that the cost of extensive dental work is less expensive in Europe than in the U.S. Therefore, even with adding the transportation cost, you could pay less for expensive dental work overseas than domestically. On that basis, the courts have ruled that such transportation costs are allowable as medical deductions. Put a real smile on your face!