Everyone loves a good tax deduction. Unfortunately, as taxpayers scour their drawers for every last cab receipt, they might be overlooking bigger deductions and credits that are not widely known. We asked five tax experts to tell us their "tricks of the trade" on deductions and credits. Here are 10 top tips they offered.
You can't deduct the volunteer work you do for charity. But you can deduct any expenses related to that work. If you drive disabled children to a baseball game once a week or pay parking to attend board meetings at a literacy charity, you can claim a standard mileage deduction or itemize your gas costs.
"If you're taking your sick next-door neighbor to the hospital, that doesn't count," says Martin Cohen, a Manhattan-based certified public accountant. "But if you're going to do some charitable work with the church or synagogue or at a civic organization, you can deduct the transportation costs."
A similar rule applies to medical travel. If your total medical expenses exceeded 7.5 percent of your adjusted gross income, you can write them off. This means you can include any travel or parking costs incurred for doctors' appointments. The mileage allowance for 2009 is 24 cents per mile, says Julian Block, a tax attorney in Larchmont, N.Y.
If you're self-employed, you can write off any expenses related to your job -- as long as you're incurring these expenses exclusively for work. If you subscribe to food magazines because you're a chef, make sure to include those in your return. If you watch TV because you're an actor who needs to keep an eye on the competition, that's another deduction.
And don't forget the mother of all deductions: the home office. If you use a room in your home, or even a particular corner, exclusively for work, you can deduct a portion of your rent or mortgage payments, says Sara Turner, a tax research specialist at the National Association of Tax Professionals. "You have to be self-employed, which means you're not an employee of a company and not receiving a W-2," she says.
You've probably heard about the $8,000 tax credit for first-time home buyers. But do you know about the $6,500 credit for repeat homewners? "That's money in your pocket," says Cohen, explaining that the $6,500 "repeat home buyers credit" goes straight into your bank account, rather than counting as a deduction that you take against income.
Many taxpayers don't bother to tally their deductions, since they know they won't meet the 2 percent threshold that allows them to start itemizing. Luckily, Congress has added some new standard deductions which anyone can take advantage of.
The latest one introduced this year to help boost auto sales: a deduction for the sales and excise tax paid on new car purchases.
"We see Congress go through different phases and favor different tax breaks," says Mark Luscombe, principal analyst for tax and accounting at Riverwoods, Ill.-based CCH. During the Clinton years, he says, Congress introduced a lot of new credits. During the Bush era, they added "above-the-line" deductions which applied to adjusted gross income. "In the last couple of years, Congress has decided they are fond of standard deductions."