American Opportunity Credit
Books & Magazines
Boats and RVs
Capital Loss Carryover
Casualty & Theft Losses
Children & Dependents
Child Care Credit
Child Tax Credit
Clothing & Uniforms
Earned Income Credit
Excess Social Security
Home Equity Loan
IRA Deduction & Credit
Job Hunting Expenses
Lifetime Learning Credit
Meals & Entertainment
State & Local Income Taxes
Student Loan Interest
Tax Preparation Fees
Weight Loss Program
Acupuncture - Taken on Schedule A as a medical expense (See Medical Expenses)back to top.
Adoption Credit - A tax credit of up to $12,650 is available for the qualified adoption expenses of each eligible child. Qualified adoption expenses include adoption fees, court costs, attorney fees, travel costs and other directly-related costs for a legal adoption. Any expenses related to the adoption of your spouse's child are not eligible. A qualified child is a child who is younger than 18 at the date of adoption or who is physically or mentally incapable of self-care. The credit begins to be phased out for taxpayers with adjusted gross income over $189,710.back to top.
Alimony - Payments are deductible if the following requirements are met: (1) the payments are in cash, checks or money orders (2) required by a divorce or separation instrument, (3) the payments are not for child support, (4) the payments are not part of the property settlement payments related to the divorce, (5) you and your (ex) spouse must not be members of the same household and do not file a joint tax return, and (6) you are not liable to make any payments for any period after the death of your (ex) spouse. One item to note is that if you owe both alimony and child support and during the year you pay less than the amounts required, then the amounts paid are first applied to your child support obligation before being applied to alimony.back to top.
American Opportunity Credit - The American Opportunity Credit replaced the Home Credit and is available for the first four years of post-secondary education. The credit is up to $2,500 per eligible student, and 40% of it may be refundable. The credit phases out for married taxpayers with income between $160,000 and $180,000 and single taxpayers with income between $80,000 and $90,000.back to top.
Attorney Fees - Are deductible if the legal expenses are related to business, the production of income, or with tax preparation or tax consulting. Legal fees related to your investments, your job, or your taxes are deducted on Schedule A as a miscellaneous itemized deduction subject to the 2% floor.back to top.
Automobile Expenses - You can either deduct your actual automobile expenses or you can use a standard mileage rate. The standard mileage rates for 2012 are 55.5 cents per mile for miles driven for business, 23.0 cents per mile for medical travel or job-related moves, and 14.0 cents per mile for volunteer work for a charitable organization. Commuting expenses are not deductible. However, if your home is your principal place of business (you qualify for the home office deduction), then any business-related commuting expenses are deductible. Also, if you are commuting to a temporary work location, your commuting expenses are deductible. Automobile expense related to your business or rental properties are deductible on Schedule C and Schedule E respectively. Automobile expense related to your job is deductible on Schedule A as a miscellaneous itemized deduction. Automobile expense for your volunteer work for a qualified charitable organization is deductible on Schedule A as a charitable contribution. Medical care automobile expenses are deducted on Schedule A subject to the 7.5% floor on medical expenses.back to top.
Auto Registration - This is deductible on Schedule A if the license or tax is based on the value of your car and not some other measure.back to top.
Bad Debts - Nonbusiness bad debts are deductible as a short-term capital loss on Schedule D. Take a tax deduction in the year the loan is totally worthless.back to top.
Boats and RVs - Interest paid on a loan to purchase a boat or an RV is deductible as interest expense on Schedule A if the boat or RV is considered your primary home or second home. The boat or RV must have cooking, toilet, and sleeping facilities.back to top.
Books and Magazines - Newspapers, magazine subscriptions and books are deductible if related to your business, job, or investments.back to top.
Business Conventions - Travel expenses for attending a convention related to your trade or business are deductible. Any unreimbursed employee expenses go on Schedule A as a miscellaneous itemized deduction. If you have a business, the expenses go on Schedule C. Travel expenses for conventions related to investments or financial planning are not deductible. Conventions held on cruise ships are limited to a $2,000 deduction per year. Foreign conventions have a variety of rules that must be met before the travel expenses are deductible, however, conventions held in North America (Canada, Mexico, etc.) are not considered foreign conventions.back to top.
Capital Loss Carryover - If you had more capital losses than capital gains in previous years, a capital loss carryover can be used on your current tax return. If you do not have capital gains to offset the capital loss carryover on your tax return, you can deduct $3,000 of the capital loss carryover against your other income and carry forward the remaining balance to future tax returns.back to top.
Casualty & Theft Losses - These losses are losses from fire, theft, storm, hurricane, flood, sonic boom, earthslide, earthquake or other sudden, unexpected, and unusual causes. Damage to your automobile resulting from a collision is also a casualty loss. Termite damage is not considered a casualty loss because it fails the "suddenness" test. If the casualty loss relates to your business, you can deduct the full amount on Schedule C. If the casualty loss is to nonbusiness property, a loss can be taken on Schedule A if the loss exceeds $100 plus 10% of your adjusted gross income. Any money you receive from insurance, government, or other parties to compensate for the damage reduces the amount of loss you can claim on your tax return.back to top.
Cellular Phone - These expenses are deductible for your business on Schedule C. Unreimbursed employee business expense is deductible on Schedule A.back to top.
Charitable Contributions - A contribution is deductible if it is made to a qualified organization. Contributions made directly to needy individuals or nonqualified organizations are not deductible. Also, the value of service that you perform for a charitable organization is nondeductible. However, any unreimbursed out-of-pocket expenses (office supplies, uniforms, long-distance phone calls, etc.) for volunteer work for a qualified organization are deductible. Any transportation expense is also deductible.back to top.
Children and Dependents - You may take a dependency exemptions for qualified dependents. There are different criteria for a "qualifying child" and a "qualifying relative."
Child Care Credit - Child care and dependent care expenses may be eligible for a tax
credit. You are eligible for the credit if you (and your spouse) have earned income and maintain a
household for a dependent under the age of 13 or for a spouse or other dependent (regardless of
age) who is mentally or physically unable to care for himself or herself. If your spouse is a
full-time student, you still qualify for the child care credit even though he or she has no earned
income. If both of you are students with no earned income, you can't take the credit.
Child Tax Credit - A $1,000 per child tax credit is available for each qualifying child under the age of 17. A qualifying child is a child, grandchild, stepchild, or foster child for whom you can claim the dependency exemption. The credit begins to be phased out for taxpayers with adjusted gross income above $110,000 ($75,000 for single and head of household).back to top.
Closing Costs - Real estate taxes and points found on your settlement statement are usually deductible on Schedule A. Mortgage interest shown on the settlement statement is usually already included in the Form 1098 you receive from your mortgage lender.back to top.
Clothing Donation - Used clothing donated to a qualified charity can be taken as a tax deduction on Schedule A. The amount of the deduction is the value of the clothing if it would have been sold at a used-clothing store.back to top.
Clothing & Uniforms - Clothing required for your job that cannot also be used for general wear is deductible as a miscellaneous itemized deduction. Laundry and cleaning expenses for qualified clothing are also deductible. Examples of deductible work clothing and uniforms are safety shoes, safety glasses, nurse's uniform, and a bus driver's uniform. Any clothing that is suitable for use off of the job, such as blue jeans, is not deductible even if you only use the jeans for work. Any qualified clothing that you use while volunteering for a charitable organization (like a boy scout uniform) is deductible as a charitable contribution. The clothing cannot be suitable for use other than for the volunteer activity.back to top.
Computer - Depreciation expense on the business portion of your home computer and peripheral equipment are deductible on Schedule C if you have a sole proprietorship. If you buy a computer to use for your job, you can deduct depreciation expense on the business portion of the purchase price if the computer was purchased as a condition of your employment, for the convenience of your employer, and is necessary for you to perform your duties as an employee. If you buy a computer to manage your investments, you can deduct the depreciation expense as a miscellaneous itemized deduction.back to top.
Contact Lenses - Tax deduction on Schedule A as a medical expense (See Medical Expenses)back to top.
Corrosive Drywall - If you paid for repairs to your personal residence or household appliances because of corrosive drywall that was installed between 2001 and 2008, you may be able to deduct the cost of the repairs on Schedule Aback to top.
Dentist - Tax deduction on Schedule A as a medical expense (See Medical Expenses)back to top.
Doctor bills - Tax deduction on Schedule A as a medical expense. (See Medical Expenses)back to top.
Dues - Union dues and dues paid to professional organizations or public services organizations (chamber of commerce, rotary club, etc.) are deductible. Dues paid to country clubs and other clubs are not deductible even if your primary purpose is business related.back to top.
Earned Income Credit - This is a refundable credit if your earned income is below certain
threshholds. In 2012, the adjusted gross income threshholds were:
Education Expenses (See American Opportunity Credit and Lifetime Learning Credit) - Up to $4,000 in education expenses can be deducted on your tax return if your modified adjusted gross income (MAGI) is not more than $80,000 ($160,000 on a joint return). If you choose to deduct the education expenses, you can not take the American Opportunity or Lifetime Learning Credit on the same student's education expenses. It depends on each taxpayer's circumstances whether it is better to deduct the education expenses or take the American Opportunity or Lifetime Learning Credit. Tuition and fees paid for the education of the taxpayer, the taxpayer's spouse or a dependent child are eligible for the deduction.back to top.
Employee Expenses - Unreimbursed employee business expenses can be deducted on Schedule A
as miscellaneous itemized deductions subject to the 2% floor. You will need to fill out Form 2106 or 2106-EZ.
Examples of employee expenses are union dues, professional dues, tools and computer related
equipment (depreciation may apply), safety shoes, safety glasses and other protective clothing,
uniforms, transportation (other than commuting), business cards, licenses, trade magazines and
subscriptions, meals and entertainment (50% is nondeductible), briefcase, office decorations,
office supplies, expenses related to temporary out-of-town job assignments, business travel,
certain education expenses, certain job search expenses, malpractice insurance, home office
expense, and any other expense that relates to your job.
Excess Social Security - If you worked for more than two employers and made more than $110,100 in wages, you may be able to claim a credit for the excess social security tax withheld from your salary.back to top.
Foreign Taxes - May be taken as a credit on Form 1116 or as a tax deduction on Schedule A.back to top.
401(k) Credit - The retirement saver's credit gives a credit for IRA contributions, Roth contributions, or 401(k) contributions. The retirement saver's credit is only available for taxpayers with adjusted gross incomes of $57,500 or less on a joint return, $43,125 for head of household and $28,750 for single taxpayers.back to top.
Gambling Losses - Are deductible to the extent of your gambling winnings. The tax deduction is taken on Schedule A.back to top.
Health Insurance - If you are self-employed, you can deduct 100% of your health insurance payments from gross income on page 1 of your Form 1040. If you are not self-employed, you can deduct health insurance payments on Schedule A (subject to the 7.5% limit for medical expenses).back to top.
Home Equity Loan - You can deduct the interest expense for home equity loans and lines of credit secured by your home. The interest expense is deductible for a loan of up to $100,000 no matter what you use the money for.back to top.
Home Office - A home office deduction is available for your business if you use a portion
of your home exclusively on a regular basis as your principal place of business. Exclusively and
on a regular basis means that if you or your family use your home office for personal use as well as
business, you are not able to take the home office deduction. However, if you use a portion of a
room exclusively for business and a portion of the room for personal use, you can still take the
home office deduction on that portion of the room used for business. The principal place of business
test is met if you perform administrative or managerial activities in your home office for your business and there is
no other fixed location where you conduct substantial administrative or managerial activities.
Hope Credit - The Hope Credit has been replaced by the American Opportunity Credit.back to top.
Interest Expense - Interest expense for your home mortgage, home equity loan, investment loans (margin interest), and student loans may be deductible on Schedule A (For further discussion, see Mortgage Interest, Home Equity Loan, Investment Interest, and Student Loan Interest). Any other personal interest such as interest on your credit cards is not deductible. Any interest expense related to your business is fully deductible.back to top.
Internet Expenses - The portion of your internet fees that relate to your business or investment income can be deducted on Schedule C and Schedule A (miscellaneous itemized deduction) respectively.back to top.
Investment Expenses - Investment expenses are deductible on Schedule A as miscellaneous itemized deductions subject to the 2% floor. Expenses include IRA fees, subscriptions to investment related magazines, professional fees related to your investments, a computer used for investments, investment advice fees, clerical help and office rent related to investments, investment related automobile expense and travel, and any other investment related expense. However, travel expenses related to investment conventions or seminars are not deductible.back to top.
Investment Interest - Deductible up to the amount of your investment income less any other investment expenses deducted on Schedule A. Investment income includes dividends, interest income and royalties. Disallowed investment interest is carried forward to future years.back to top.
IRA deduction and credit - If you are younger than age 50, you can contribute up to $5,000 to your IRA in 2012. If you are age 50 or older, you can contribute up to $6,000 in 2012. In addition to the normal IRA deduction, the retirement saver's credit gives a credit for IRA contributions, Roth contributions, or 401(k) contributions. The retirement saver's credit is only available for taxpayers with adjusted gross incomes of $57,500 or less on a joint return, $43,125 for head of household and $28,750 for single taxpayers.back to top.
IRA fees - Tax deduction taken on Schedule A. (See Investment Expenses)back to top.
Job Expenses - See Employee Expensesback to top.
Job Hunting Expenses - Are deductible as a miscellaneous itemized deduction on Schedule A if you are looking for a job in your present type of work. You can't take a deduction if you are looking for your first job, changing to a job in a new line of work, or if you have been unemployed for a long period of time. Deductible expenses include resume costs, employment agency fees, automobile expense, travel expenses, long-distance phone calls, 50% of related meals and entertainment, and any other job hunting expenses.back to top.
Licenses - Licenses related to your business or job are deductible on Schedule C or Schedule A respectively. For auto licenses (See Property Taxes).back to top.
Lifetime Learning Credit - A credit of up to $2,000 per student is available for any college tuition paid during a year that the American Opportunity Credit or Education deduction is not claimed for that particular student. The credit is 20% of any tuition or class fees paid up to $10,000 (for a total allowable credit of $2,000). Athletic fees, housing costs, student activity fees and books are not eligible expenses for the American Opportunity or Lifetime Learning credits. The credit phases out for married taxpayers with adjusted gross income between $104,000 and $124,000. For single taxpayers and others not filing a joint tax return, the adjusted gross income phase out is between $52,000 and $62,000. If your income is too high to take the Lifetime Learning Credit for your child's education expenses, IRS regulations allow your child to claim the Lifetime Learning credit on his or her own tax return as long as you do not claim your child as a dependent on your tax return. Alternatively, you may still be eligible for the education deduction which has a higher income limitation (See Education expenses).back to top.
Margin Interest - See Investment Interestback to top.
Meals and Entertainment - Business-related meals and entertainment expenses can be taken as a tax deduction if either one of the following tests are met: (1) the meals or entertainment is directly related to the active conduct of your trade or business or (2) the meals or entertainment is directly before or after a bona fide business discussion. Only 50% of meals and entertainment expenses can be deducted on your tax return. For record keeping, you need to write down who you were with and the business relationship, the business reason and business discussion as well as keep the receipt showing the cost, date and location of the meals or entertainment.back to top.
Medical Expense - Unreimbursed medical expenses for you, your spouse, and any dependent
are deductible on Schedule A to the extent that the expenses exceed 7.5% of your adjusted gross
Mortgage Interest - Interest is deductible on a loan(s) of up to $1 million used to acquire, construct or improve your principal residence and a second residence. The tax deduction is taken on Schedule A. Your primary home or second home can be a house, condo, RV, boat, or camper as long as it has cooking, toilet, and sleeping facilities.back to top.
Moving Expenses - Are limited to transportation costs for your family and belongings, packing costs, certain lodging costs, and certain storage costs. You can either deduct your actual automobile expenses or the standard mileage deduction of 23.0 cents a mile . For lodging costs, you can deduct the lodging expense for the night before the move, the nights during the move, and the night after you arrive at your new city. For storage costs, you can deduct the first 30 days of storage expense. Other expenses such as meals, temporary living costs, and house-hunting trips are not deductible. To be qualified moving expenses, the move must be job related, meet the 50 mile test, and meet the time test. The 50 mile test is met if the distance from your old home to your new workplace minus the distance from your old home to your old workplace is greater than 50 miles. The time test is met if you work full-time for 39 weeks in your new home town during the first 12 months after your move. Moving expenses are calculated on Form 3903 and deducted on page 1 of Form 1040.back to top.
Nursing Home - (See Medical Expenses)back to top.
Optometrist - Tax deduction taken on Schedule A as a medical expense. (See Medical Expenses)back to top.
Points - Points (loan origination fees) paid to acquire or improve your principal residence are fully deductible in the year paid. However, points paid to refinance your mortgage for a better interest rate, acquire a second residence, or to obtain a home equity loan are deductible over the life of the loan.back to top.
Property Taxes - Real estate taxes for your home and any other personal residences you own are deductible on Schedule A. Property taxes on your car and other personal property are deductible if the tax is assessed on the value of your personal property.back to top.
Prescription Drugs - Tax deduction on Schedule A as a medical expense. (See Medical Expenses)back to top.
Roth IRA - If you are younger than age 50, you can contribute up to $5,000 in 2012 to your Roth IRA. If you are age 50 or older, you can contribute up to $6,000 in 2012. When you make a Roth contribution, you also may be eligible for the retirement saver's credit which gives a credit for IRA contributions, Roth contributions, or 401(k) contributions. The retirement saver's credit is only available for taxpayers with adjusted gross incomes of $57,500 or less on a joint return, $43,125 for head of household and $28,750 for single taxpayers.back to top.
Self-Employment Tax - 50% of your self-employment tax is taken as a deduction on page 1 of Form 1040.back to top.
State & Local Income Taxes - Deductible on Schedule A for the year the taxes are paid. EXAMPLE: On April 15, 2012, you send a check for $1,500 to the state of Oregon for the balance due on your 2011 Oregon tax return. The $1,500 is deducted on your 2012 tax return.back to top.
Student Loan Interest - Student loan interest is fully deductible if your adjusted gross income is below $50,000 (single) or $100,000 (married). If your adjusted gross income is between $60,000 and $75,000 (single) or $120,000 and $150,000 (married), you will get a partial deduction for student loan interest. The maximum amount of deductible interest is $2,500 for 2012.back to top.
Tax Preparation Fees - Deductible as a miscellaneous itemized deduction subject to the 2% floor on Schedule A. If related to your business or rental properties, the fees are deductible on Schedule C or Schedule E respectively.back to top.
Teacher Expenses - Full-time Kindergarten through 12th grade teachers, counselors or principals can deduct up to $250 for out-of-pocket expenses that they pay for supplies, books, equipment and materials used in their classroom.back to top.
Telephone - Long-distance phone calls related to business, investments, rental properties, or your job are deductible. The basic local phone costs of the first phone line in a residence is considered personal and is not deductible. However, a second phone line or additional telephone services on the first line such as call waiting may be deductible expenses.back to top.
Tools - See Employee Expensesback to top.
Travel Expense - Travel expenses while away from your "tax home" for your business or your job are deductible on Schedule C
and Schedule A respectively. Your tax home is your regular place of business. You are considered
away from your tax home if you are out of the general area of your tax home for a period longer
than a normal workday, and you need to sleep or rest. Deductible travel expenses include meals
(see Meals and Entertainment), lodging, transportation, automobile
expense, taxi fares, telephone expense, and laundry and dry-cleaning expenses.
back to top.
Volunteer Expenses - See Charitable Contributionsback to top.
Weight Loss Program - Deductible if program is to treat a medical condition (See Medical Expenses)back to top.
Worthless Stock - Taken as a short-term capital loss on Schedule D in the year the security is totally worthless.back to top.