Deductions You Can Claim on Your Taxes

If you’re looking to save money this tax season, itemizing deductions claimed on your taxes can the way to go. One problem that we see often is that because there’s often SO many deductions available, the average tax payer doesn’t even know where to begin! At Innovation Tax  Service, we understand how confusing it can be. Not everyone is born an Accountant. We’re here to help you Find a Tax Preparer that knows the finer details of finding deductions you can claim on your taxes. In this article, we’ll take a look at some common and uncommon deductions to help clear up some of the confusion and point you in the right direction.

What Are  Some Common Deductions
 There is no general rule for what is applicable for deductions, but there are some common ways that people can reduce their tax burden.

• Medical  Expenses: Did you know that if you have significant medical bills, they may be deductible from your taxes? There are factors that influence the eligibility of your deductions. The first is that the medical expenses must be legitimate and prescribed by a physician—cosmetic and non-essential procedures are not eligible for deductions. Health care premium, on the other hand, are eligible. Furthermore, your deductions are subject to the “7.5% rule.” This rule states that your medical bills are deductible after being subtracted by 7.5% of your gross adjusted income. 
• Charitable  Donations: Donating to charities is an excellent way to feel good about yourself AND save money come tax time. Under usual circumstances, 50% of  your gross income is deductible under charitable donations. Before giving cash to the needy, make sure that the charity you’re helping is qualified as a 501(c)(3). Also, make sure that if you donate property, like a vehicle, that you are aware of the fair market value (FMV) and deduct accordingly. The FMV can be calculated from the price that you would normally receive from a private buyer. There could be a significant variance in prices, so to avoid an audit and penalties associated with a false deduction, hiring an Accountant is a smart move.
• Real Estate Taxes Paid: As long as your taxes paid are based on the assessed value of the property, you are able to claim deductions on real estate taxes on state, local and foreign taxes. However, you must be careful—taxes charged for improvements to the property (like a deck, pool, or koi pond) are not deductible. Also, mandatory services encouraged by homeowner’s associations like mowing or holiday decorations are not deductible, as well. 
• Income Taxes: You are  eligible for deductions if you paid your state and local income taxes  throughout the year. However, this is subject to an exception: if those state  and local taxes are exempt from federal taxes, they are NOT eligible for  deductions unless the exempt income  falls under interest income. State and local taxes also do not have to be paid  in a lump sum, as you are able deduct estimated tax payments and deduct  withheld taxes. Taxes paid towards Social Security, Railroad Retirement, and  Medicare are also not eligible for deductions. 

What Are  Some Uncommon Deductions?
 It never hurts to do your research. Certain items may be eligible that don’t seem to be logical or even related to your business, but are recognized as worthy of relieving your tax burden. Some deductions are even state/region specific. Let’s look into some examples to illustrate this:

• Pet  relocation: If you recently had to move for a new job after losing your old one, the expenses related to this are generally tax deductible if you meet the eligibility requirements. What’s surprising is that any expense related to your pet, including dogs, cats, and even tarantulas, are deductible as well. Need a car carrier? That’s tax deductible, too!
• Deer in  South Carolina: You can be eligible for a $50 tax deduction if you donate a deer to the poor.
• Swim for  your taxes: Medical expenses are usually subject to the aforementioned 7.5% rule, which seems to make sense. Strangely, if you have a medical condition that can be alleviated by using a pool for exercise and pain relief (ex. arthritis), the cost of the pool can be written off. However, the catch is that if the pool was used for recreational purposes, it would not be eligible for tax deductions.
• Stop the  dirty habit: Everyone agrees that smoking is extremely detrimental to your health and well-being, but did you know that you can claim deductions on items related to helping you stop as a medical expense? This includes smoking cessation programs, hypnosis sessions, nicotine patches/gum, et cetera.
• Get shiny: Expenses related to running your business are deductible. This holds true, even if your business is as esoteric as bodybuilding. Aspring Arnold Schwarzeneggers can deduct the muscle-emphasizing oil used in competitions as a legitimate expense.