Ten Top Commonly Missed Tax Deductions To Put Cash in Your Wallet

March 4, 2010 — -- 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.

Driving to the Fundraiser

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."

...Or to the Doctor

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.

Magazines and Television

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.

Not a First-Time Home Buyer?

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.

Car Credit

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."

Disaster Losses

This is another fairly new standard deduction. If you had losses related to a catastrophe in a federal disaster area – say, you lost your laptop in the California wildfires – and insurance didn't cover your whole loss, you can write it off on your return. "Property losses are the common deductions here," says Luscombe. While you can't write off the new price of the item you lost, you can deduct its fair market value, defined as the price you could have commanded if you had sold the item second-hand before it was destroyed.

Real Estate Tax Break

This is probably the most popular one of the new standard deductions. Single filers can deduct up to $500 in real estate taxes, while joint filers can deduct $1,000. "It's a nice break, especially for younger homeowners," says Turner of the National Association of Tax Professionals. In the past, homeowners could only deduct their property taxes if they met the 2 percent itemizing threshhold.

Old School Books Used For Work

If you're a student you can't deduct the books you buy for school. But once you graduate, as long as you're actually using the books for work, you can amortize those books as part of your "professional library." Amortization basically means you're writing off the purchase over a longer period of time. That's not a bad deduction considering that many students spend thousands of dollars on text books.

The usual rules for itemized deductions apply here. If you're self-employed, you can itemize to your heart's content. But if you work for a company, you can only itemize your library if all your work-related expenses exceed 2 percent of your adjusted gross income, says Manhattan CPA Cohen.

Unemployed 'Vacations'

"The best time to go on vacation is when you're unemployed," says Cohen, only partly joking. If you're looking for a job, and land some interviews in Orlando, Fla., the IRS doesn't care if you stop over at Disneyland for a night.

You do have to limit your deductions to fair expenses related to your trip: your airline ticket, the hotel you stayed in the night before your interview.

"You can bring your wife too. The hotel costs the same whether she's with you or not," he says. Just make sure that the primary purpose of your trip is related to your job hunt.

Help With Health Coverage

If your lost your job to someone overseas, the government will pay up to 80 percent of your health care costs. To qualify for this "health coverage tax credit," you must be receiving "trade adjustment assistance" (TAA) benefits, or must be receiving a pension from the government after your employer terminated its retirement plan.

This credit doesn't affect a huge swath of Americans, but many who qualify for it don't even know it. "The IRS is worried that too few qualified taxpayers are taking advantage of it," says CCH's Luscombe.