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It's that time again, the April 15 tax
deadline is looming large. If youre like most people, you
havent gathered all of your tax records, let alone filled
your return. Before you dig in and get started, take this
opportunity to first review a list of a few tax deductions
to which you may be entitled if you itemize deductions but
most people overlook. Many of these deductions are subject
to various limitations, so consider getting professional
help from your tax advisor and accountant to determine which
deductions you qualify for and which items apply to your
specific circumstances. Remember, there are hundreds of
deductions throughout the tax laws; many of them can be
quite obscure but also quite lucrative. Here are seven
commonly missed deductions to keep top of mind:
- Points on Refinancing: With interest rates so low in
2003, there was a great deal of refinancing activity. Any
points you pay to refinance your home can be deducted
ratably over the life of the new loan. Furthermore, all
unamortized points on old refinancing are deducted in the
year of the new refinancing.
- Health Insurance Premiums: Any health insurance
premiums you pay, including some long-term care premiums
based on your age, are potentially deductible. Medical
expenses have to reach 7.5% of your adjusted gross income
before they give you any tax benefit. Self-employed people
can deduct 100% of health insurance premiums paid for
themselves, their spouses and their dependents.
- Non-Cash Charitable Contributions: If you have used
your charge card for contributions to charity, remember
that the deduction is allowed in the year that you made
the charge, not when you actually pay the bill. Also, you
may write off certain out-of-pocket expenses related to
charitable activities. Appraisal fees paid to value
property donated to charities may be taken as a
miscellaneous deduction subject to the 2% floor on
miscellaneous deductions.
- Higher-Education Expenses: If your adjusted gross
income wasnt more than $65,000 ($130,000 for married,
filing jointly) in 2003, you can get an above-the-line
deduction for as much as $3,000 for any higher-education
tuition and fee expense you paid. For 2004, the deduction
can be as much as $4,000. For those at higher adjusted
gross incomes limits ($80,000 single, $160,000 married
filing jointly) the deduction is limited to $2,000 for
2004. This deduction must be coordinated with other
education credits and savings vehicles.
- Work-Related Expenses: You can write off many
work-related and work-search expenses, such as education
that maintains or improves your skills, certain business
tools, dues to labor unions, cell phone depreciation,
certain expenses to search for job in your present
occupation, including employment agency fees, resum
preparation, and travel expenses (local and out of town)
and cleaning and laundry bills when on a business trip.
Work-related expenses are subject to the 2% floor on
miscellaneous deductions. Furthermore, if you buy a new
SUV for business use that weighs more 6,000 pounds, and
file Schedule C or other business tax return you may be
allowed to write off the full amount (up to $102,000 in
2004) in one year as a business expense subject to
limitations.
- Clean-Fuel Deduction: If you are not in the market for
a large SUV for business, you still can get a deduction
for your personal car, another above-the-line deduction of
up to $2,000 for 2003 ($1,500 for 2004) of the cost of
buying a clean-fuel vehicle or a car that uses a
significant source of energy other than gasoline. That
includes hybrid cars, such as the Toyota Prius, the Honda
Insight and the Honda Civic Hybrid. You get the deduction
in the year you start using the car, and you must be the
original owner.
- Investment and
Tax Expenses: In addition to forgetting
to deduct tax-preparation fees and the portion of your
legal, accounting or financial planner fees that relate to
tax planning, many people miss deducting investment
expenses. Those include certain fees paid to your
financial advisor and/or broker and certain IRA fees you
may pay directly. It also may include mileage for meetings
and long-distance phone calls to your advisor or broker. Dont forget to include deductions for the cost of your
investment publications or subscriptions, safe deposit
boxes used for investment-related documents, these
deductions are subject to the 2% floor on miscellaneous
deductions.
About The Author
Sandra N. Salter, Personal Finance Expert, is an American
Express Financial Advisor and owner of American Express
Financial Advisors Branch Office in Newark, NJ. She focuses
on providing comprehensive financial planning services
paying close attention to the long-term financial health of
their clients, building customized financial plans that help
clients achieve both short-term and long-term goals. The
types of services she offers clients include: Income Tax
Planning, Saving and Investing for Retirement, Working with
Retirees, Financial Strategies for Small Business, Domestic
Partner Planning, Risk Protection Planning, Estate Planning,
Charitable Giving , Investment Strategies for Education ,
Asset Allocation and Comprehensive Financial Planning, among
other areas. They can be reached at
sandra.n.salter@aexp.com.
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