The 7 Tax Deductions You Shouldn't Overlook
Here are tax deductions people regret overlooking.
Feb. 18, 2013 — -- intro:The good thing about taxes is they're only filed once a year. The bad thing is it's almost impossible to remember which tax deductions you qualify for each year.
"Credits come and go. It's hard to remember," says Bob Wheeler, a certified public accountant in Santa Monica, Calif.
While the IRS does all it can to help taxpayers determine which itemized deductions to apply to their taxes, there are enough possible tax deductions that it's easy to miss some, experts say.
The good news is that for most people who haven't had major life changes -- having a child, losing a job, buying a house, getting married, etc. -- filing taxes shouldn't be too hard, says Mark Steber, chief tax officer at Jackson Hewitt Tax Service.
"The bottom line for most taxpayers is that 2012 should mostly represent 2011, because there weren't many tax law changes," Steber says.
Here are some of the tax deductions you don't want to overlook:
quicklist:title: Medical coststext: These include health insurance premiums, dental care, glasses, counseling, therapy, and miles driven to medical appointments, Wheeler says. The medical expenses must add up to more than 7.5% of your adjusted gross income (AGI) for 2012 taxes. In 2013, that figure rises to 10% of AGI, he says. Long-term care insurance is deductible, subject to specific dollar amounts depending on age, says Gail Rosen, a CPA in Martinsville, N.J. Weight-loss programs are deductible if undertaken as treatment for a disease diagnosed by a physician, she says.
quicklist:title: Housingtext: Deducting mortgage interest is a no-brainer, but other costs when buying a house can be deducted from taxes, including private mortgage insurance, points paid on an original mortgage, and energy credits. "Once you get past a mortgage and a W-2, it just gets a whole lot more complicated," says Wheeler.
quicklist:title: Educationtext: Student loan interest is commonly missed, Steber says. Parents contributing to a child's college education can choose to take a tuition and fee deduction of up to $4,000, or can take tax credits, he says. The American Opportunity Tax Credit is for up to $2,500 per student for the first three years of college, and the Lifetime Learning Credit is for up to $2,000 per family for every additional year of college or graduate school, Rosen says.
quicklist:title: Non-cash charitable contributionstext: Deducting a cash contribution to a charity is easy enough, but too often people don't accurately value non-cash contributions such as clothes, Steber says. Determine fair-market value and don't value them for less than they're worth, he recommends. Other charitable deductions include expenses paid of behalf of a charity, and donating appreciated stock, Rosen says.
quicklist:title: Retirementtext: The American Taxpayer Relief Act of 2012 allows taxpayers to roll over funds from a regular 401(k) retirement account into a Roth account under the same plan. For people with IRAs, some miss the opportunity to contribute to it and don't realize that it's a deduction that doesn't need to be funded by Dec. 31 of the tax year, says Neil Johnson, a CPA in Northbrook, Ill., who blogs about taxes at TheTaxDude.com. Taxpayers have until April 14 of the following year to fund their IRA.