It is tax time and I have spent a lot of time browsing the IRS site to make sure I have not overlooked any opportunities for tax breaks or deductions. These were some that were helpful and new to me, so thought I’d pass them along:
- Medical & Dental Expense Deductions It has been a rough year. My employer stopped paying for my health insurance, so I had to pay out of pocket and then I got laid off. So I was happy to find out that you may benefit from a medical tax deduction if your medical expenses exceed 7.5% of your adjusted gross income. Medical expenses include: insurance premiums, fees paid to doctors, dentists, chiropractors psychiatrists, Christian Science practitioners, hospital services, lab fees, prescription glasses, contact lenses, laser eye surgery, hearing aids, crutches, wheelchairs, guide dogs….) You will need to fill out Form 1040 Schedule A to determine the deductible amount.
Note: You may not deduct insurance premiums paid by an employer sponsored health insurance plan unless the premiums are included in Box 1 of your Form W-2.
In addition, I read that if you are self employed you may be able to deduct 100% of your health insurance premiums:
If you are self-employed and have a net profit for the year, or if you are a partner in a partnership or a shareholder in an S corporation, you may be able to deduct, as an adjustment to income, 100% of the amount you pay for medical insurance for yourself and your spouse and dependents. You can include the remaining premiums with your other medical expenses as an itemized deduction. You cannot take the special 100% deduction for any month in which you are eligible to participate in any subsidized health plan maintained by your employer or your spouse’s employer.
- Educator Expense Deduction My mom has been a teacher for 20 years and often purchases books supplies out of her own pocket for her students. She’ll be happy to know that she may qualify for a tax deduction for these purchases, up to $250. This deduction is valid for 2008 and 2009. To claim these deductions write “E” on line 23 of Form 1040or line 16 of Form 1040A.
- Federal Tax Credits for Energy Efficiency I found this on the Energy Star website and I ended up getting a tax credit for $800 off the installation cost of new insulation for my house! We rushed to get the work done before the end of 2008 because the tax credit was set to expire. But the good news is that these tax credits have been extended through 2010 as part of the new stimulus bill (American Recovery & Reinvestment Act). So if you are planning to have energy efficient upgrades done to your house, find out if your upgrades qualify for the tax credit and make sure that you fill out the proper forms. Upgrades include new storm doors, windows, insulation, skylights, roofs, solar & wind systems and a bunch of HVAC upgrades.
- Deductible Refinancing Costs This is somewhat confusing, but could result in some extra tax return money. Apparently, if you refinance and pay for points down, you can deduct 1/30th of the points you paid down on a 30 year mortgage. So not a huge return, but still it’s money in the bank. In addition, if you refinance again, at that point all the remaining points on your previous loan are deductible. This is great because I refinanced last April and again last month to get my rate down to 4.75% and now I might be able to be reimbursed for the points that I paid down on my April refinance! So if you have refinanced recently I would definitely look into this.
- Qualified Transportation Benefits This is an optional employer based incentive for commuting expenses. By offering reimbursement for commuting costs, employers and employees save all income and payroll taxes on the amount of money that they give for qualified transportation fringe commuting benefits. Public transit users could qualify for $115/month and car parkers could qualify for $210/month. I just found out that a bill will include reimbursements for bike commuters in 2009 ( I think you have to commute to riding your bike for 60% of your commuting) and since I often bike to work, I am hoping to take advantage of this next year. Looks like I might be eligible for up to $20 for biking to work. To find out more about the bicycle tax provision check out the FAQs on the League of American Bicyclists.
- And finally, for those of you who are currently collecting unemployment like myself, I got this tip from a friend who is an accountant: The first $2,400 of unemployment compensation in 2009 is tax free, but once you earn over that amount you will have to have state and federal taxes withheld.
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