10 BIG TAX DEDUCTIONS PEOPLE MISS
NonCash Contributions
Charity, as I hope everyone remembers, begins with a tax deduction. If you didn't have the cash when it came time to contribute, you may charge it. The deduction is allowed in the year of charge, not when you actually pay the bill. Get a receipt from the charity to which you made a donation and, if you're still worried about documentation, get the credit card company to send you their record of the transaction.
Now, let's say you emptied your closets and gave everything to Goodwill or a similar charity. The value of your donated items clothes, furniture, whatever is deductible. Get a written receipt. With noncash charitable contributions, the rule is simple: No receipt means no deduction if you get audited. If you've already dumped your old clothes in a Salvation Army box and walked away without a receipt, take the deduction anyway. You've legitimately made the contribution.
You just may not be able to prove it in an audit. Play the audit lottery. You're still an honest person. (If you can, reconstruct as much as you can the list of items you donated and then figure out their market value. The easiest way is to go to a Salvation Army or thrift store and check prices there. And then, of course, get that receipt.)
New points on refinancing
With interest rates so low over the past few years lots of homes have been refinanced, sometimes more than once. Any points you pay to refinance your home can be deducted on a monthly basis over the life of the new loan. So, if you refinanced your mortgage for a 20-year term, seven out of 240 months will have passed after Dec. 31. If you paid $2,400 in points, you can write them off. You can write off $120 for the next year and each year thereafter until the points have been deducted in full. The amount may not be huge, but every little bit helps.
Old points on refinancing
This is one deduction lots of people miss. All unamortized points on an old refinancing are deducted in the year of a new refinancing. So, let's say you refinanced on June 1, 2003, and paid $2,400 in points. You refinanced again on June 1, 2004. You can deduct all the remaining points on the 2003 loan. That's $2,280 plus the $50 you could deduct for January through May 2004. Likewise, if you refinance the 2004 loan in 2005, you will be able to write off the remaining balance on your 2004 points.
Health insurance premiums
Any health insurance premiums you pay, including some longterm care premiums basedon your age, are potentially deductible. You have to add these, however, to your medical expense pot. Medical expenses have to exceed 7.5% of your adjusted gross income (AGI) before they give you any tax benefit. But if you're selfemployed and not covered by any other employer paid plan, you can deduct 100% your health insurance premiums above the line. Above the line means the expense is included in adjusted gross income and doesn't get lumped in with itemized deductions. That means that you not only don't have to exceed the 7.5% floor, you don't even have to itemize!
Educator expenses
If you're a qualified educator, you can get an above the line deduction of as much as $250 for materials you bought during the year. That includes books, supplies and even computer equipment. You qualify if you're a kindergarten through grade 12 teacher, aide, instructor, or principal.
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