Tax Facts: 6 Tax Deductions to Remember This Tax Season
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This tax season, even tax professionals are appalled by the complexity of some of the new taxes we’re facing. Visualize 50 nearly-bald CPAs and EAs running screaming from a seminar room, tearing out what’s left of their hair. Me? I just sat there crying.
Here’s a look at some tax deduction changes you should remember when filing your taxes this year:
1. Medical deductions. This year, folks ages 65 and over can reduce their medical expenses by 7.5 percent of their adjusted gross income (AGI). This benefit will last until the 2017 tax year. The rest of us—people younger than age 65—must reduce medical expenses by 10 percent of AGI. You may face some high expenses for senior care housing or special needs education programs, so keep this adjustment in mind.
2. Sales tax deductions. This deduction ends with the 2013 tax return. It may be reinstated, though, because it was designed to give a break to people who live in states without income tax.
For 2013, use this IRS tool to figure out your sales tax deduction based on family size and income. Add in any major purchases, such as a car, boat, airplane, or RV. If the total is higher than the state income taxes you paid in 2013, use the sales tax deduction instead.
An added bonus to this deduction: Deducting sales taxes instead of income taxes means the state tax refund you receive in 2014 won’t be taxable.
3. Casualty loss deductions. With all the storms and disasters that happened in 2013, you may have experienced some kind of destruction for which you did not receive full reimbursement from your insurance company.
There are two kinds of casualty losses: business and personal. Business casualty losses are fully deductible on your business tax return or Schedule C. Personal losses are tougher to deduct. First, you must deduct 10 percent of your AGI from those losses. Then you need to reduce the losses by another $100. Most people don’t overcome those thresholds. Keep really good records of how you arrived at the value of your losses, and don’t lose the data because these losses are often audited.
4. Disaster losses. The IRS has special rules for casualties in certain major disaster areas. (Click here for a list of locations and the special rules for disasters going back to 2011.) If you were a victim of one of these disasters, you might be able to use the losses in a prior year to get a quicker refund. Speak to a tax pro about how this works.
5. Theft losses. There are special rules for deducting thefts and worthless stocks. You may claim your deduction for up to seven years after the loss occurred if you discover the loss after it happens.
6. Contributions. The two most important things to remember when deducting your charitable contributions are:
Doing some extra digging for expenses can increase your deductions, and keeping terrific records will ensure that you can protect your deductions if you’re ever audited.
Eva Rosenberg, EA is the publisher of TaxMama.com ®, where your tax questions are answered. She is the author of several books and ebooks, including Small Business Taxes Made Easy. Eva teaches a tax pro course at IRSExams.com and tax courses you might enjoy at http://www.cpelink.com/teamtaxmama.
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