IRS Taxes: Deduct This, Not That

If you're an employee, travel costs must be claimed as unreimbursed business expenses. As such, your business and other miscellaneous itemized expenses must exceed 2 percent of your adjusted gross income.

Whatever your business travel situation, be sure to keep good records.

You also could encourage your employer to establish a commuter savings account program. This employee transportation fringe benefit lets workers use pretax dollars to purchase mass-transit passes and pay for parking near work.

Don't deduct your pet, but ...

Yes, your dog or cat is a family member. And yes, some insurance companies now include coverage for Fido or Fluffy in auto policies.

But your affection for your pet or an insurer's willingness to pay for some of your domesticated animal's care doesn't carry any weight with the IRS. So don't dare try claiming your pet as a dependent. Yes, it has been done. And yes, it is disallowed by the IRS when the furry facts are revealed.

You can, however, deduct as itemized medical expenses the costs of buying, training and maintaining a guide dog or other service animal to assist a visually impaired or hearing-impaired person, or a person with other physical disabilities.

Don't deduct Social Security taxes, but ...

You lose a lot of income each payday to Federal Insurance Contributions Act, or FICA, taxes, the money withheld from your checks to pay for your future Social Security benefits. The debate as to whether Social Security will be around when you retire is still raging. But one thing is sure: Don't even think about trying to deduct these taxes.

But if you overpaid this tax, you can get a credit for your Social Security overwithholding. There is a limit on how much FICA taxes can be contributed each year. The tax is withheld on up to the Social Security earnings base, which is adjusted annually for inflation, and which for 2012 is $110,100 and for 2013 is $113,700.

If you had multiple jobs and your combined earnings exceeded the wage base, you probably had too much FICA withheld. You can claim the excess Social Security tax as a credit when you file your tax return.

Don't deduct plastic surgery, but ...

If you simply are following your inner Joan Rivers, the IRS definitely won't let you deduct the costs of your nips and tucks.

The IRS specifically says you generally cannot include in deductible medical expenses the amount you pay for procedures such as face lifts, hair transplants, hair removal (electrolysis) and liposuction.

But if a surgery is medically prescribed, for instance, a nose job to treat respiratory issues, and you just happen to like the look of your new sniffer, then that's OK. The doctor's decision makes it a medical deduction.

The IRS says: "You can include in medical expenses the amount you pay for cosmetic surgery if it is necessary to improve a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma or a disfiguring disease."

Remember, all your medical expenses, including any allowable plastic surgeries, must come to more than 7.5 percent of your adjusted gross income on your 2012 Schedule A before you can claim them. For the 2013 tax year, the medical deduction threshold is 10 percent of your AGI.

Don't deduct dry cleaning, but ...

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