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March 25, 2015

10 tax deductions you didn’t know existed

Personal Finance Taxes

Content sponsored by Tax Authority 195x33

Nobody wants to risk skirting IRS rules by claiming a deduction that isn’t allowed – it’s against the law and it’s asking for trouble. But it’s surprising how many taxpayers miss out on perfectly legitimate deductions they could claim on their federal tax return, but don’t – either because they’re unaware that a particular expenditure is deductible, or they forget to make a note of it and to share the details of it with their tax preparer. 

Here are 10 legal deductions that might come as news to you:

Equipment for exercise or physical activity 

If your doctor prescribes a particular activity for therapeutic or recuperative reasons, say after an illness or accident, the cost of the relevant equipment may be deductible. It might be a swimming pool for hydrotherapy, or a treadmill to regain footing after a broken ankle. But if it’s doctor-prescribed for health concerns, it’s legit.

Lost gambling monies 

This one surprises many people. You can deduct betting losses you rack up at the casino or racetrack up to the amount of your gambling winnings in that year. This is one in which receipts (tickets, betting stubs, etc.) are crucial. Incidentally, the deduction of gambling losses isn’t allowed by many states, but on the federal return it’s legal.

Costs incurred in a job search 

Being unemployed is hard, but spending precious funds on travel, gas, tolls, food, lodging, and other necessities in the process of applying and interviewing for a new job adds insult to injury. The good news is that the amount of such expenses greater than 2 percent of your adjusted gross income can be deducted. The deductions can include everything from fees paid to an employment agency ... to the money you spend on printing resumés ... to the postage you need to mail them. But be warned: this deduction applies only to searching for a new job – not searching for your first job.

Smoking cessation 

In a laudable attempt to support people trying to quit smoking, the IRS will allow smokers to deduct the cost of doctor-prescribed programs or treatment regimens designed to help you kick the habit. The only aspect of quitting that this deduction doesn’t cover is over-the-counter (non-prescription) remedies such as nicotine patches. One more reason to quit!

Losing weight 

Same as with smoking, and as long as your decision to shed pounds is under doctor’s orders. Chronic or morbid obesity, heart disease, and high blood pressure are all conditions for which your physician will likely recommend a program designed to help you eat less and move more. The costs associated, other than special foods and beverages, with such a program are deductible.

Certain clothing 

By this, we mean uniforms – or any clothing that’s demanded for your work, and with the proviso that the clothes can’t be appropriate for use on your day off. Basically, anyone who wears a uniform or costume in the performance of a job – police, nurses, pro athletes, even show-business performers – can deduct the cost of that clothing as long as it’s job-specific.

Airline fees 

There seem to be more add-on fees connected to airline travel these days than ever – for checked baggage, for booking by phone rather than online, and of course those pricey fees for changing tickets at the last minute. Don’t forget that these fees should be included in your deductible travel expenses, providing your trip is a business trip.

Miscellaneous medical expenses 

There’s a long list of items related to your health and medical care that are deductible – prescription contact lenses, for example (but only when the unreimbursed cost is greater than a certain percentage of your Adjusted Gross Income, depending on your age). Even the saline solution to clean your lenses is deductible. Also on the list of medical deductions are pregnancy test kits, breast pumps and other lactation supplies for new mothers, even travel expenses to a conference on a disease that impacts someone in your immediate family (a spouse or dependent). And of course, nothing paid by insurance can be included in these deductions.

“Green” improvements to your home 

The days of IRS tax credits for environmentally beneficial home renovations and modifications – like re-doing your attic insulation or installing storm windows throughout your house – may be over. But unorthodox or cutting-edge energy choices like hot water heaters that work via solar power; heat pumps that rely on geothermal energy from the earth; and turbines that capture wind power still qualify for tax credits – as much as 30 percent of the total cost of installing such systems.  

Out-of-pocket charitable contributions 

For large cash gifts to nonprofit organizations you support, your letter of acknowledgement and canceled checks are reminders to deduct come tax time. But don’t forget small “out of pocket” expenses that pop up in your charitable work year-round. Purchasing ingredients for a cake for a church bake sale, driving miles to and from philanthropic work, envelopes and stationery you buy for fundraiser mailings, etc. all qualify!

At tax time, it pays to review your expenditures carefully, to make sure you’re not passing up a deduction that could significantly reduce your tax bill – or better yet increase your refund check. But don’t forget, whatever the deduction, have full documentation and backup for whatever you claim!