Itemized Deductions

Gregory J. Cook, EA, CPA, Accredited Tax Advisor

Medical and Dental Expenses

If you itemize your deductions on Form 1040, Schedule A, you may be able to deduct expenses you paid during the year for medical care (including dental) for yourself, your spouse, and your dependents. A deduction is allowed only for expenses paid for the prevention or alleviation of a physical or mental defect or illness. Medical care expenses include payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or treatment affecting any structure or function of the body. The cost of drugs is deductible only for drugs that require a prescription, except for insulin.

Deductible Taxes

There are four types of deductible non-business taxes:

State, local and foreign income taxes;
Real estate taxes;
Personal property taxes; and
State and local sales taxes.

To be deductible, the tax must be imposed on you and must have been paid during your tax year.

Home Mortgage Points

The term "points" is used to describe certain charges paid to obtain a home mortgage. Points may be deductible as home mortgage interest, if you itemize deductions on Form 1040, Schedule A. If you can deduct all of the interest on your mortgages, you may be able to deduct all of the points paid on the mortgage.

Interest Expense

Interest is an amount you pay for the use of borrowed money. To deduct interest you paid on a debt you must be legally liable for the debt. Additionally, you generally must itemize your deductions, unless the interest is on rental or business property or on a student loan.

Contributions

Charitable contributions are deductible only if you itemize deductions on Form 1040, Schedule A. To be deductible, charitable contributions must be made to qualified organizations. See Publication 526, Charitable Contributions.

Casualty and Theft Losses

Generally you may deduct losses to your home, household items and vehicles on your Federal income tax return. You may not deduct casualty and theft losses covered by insurance unless you file a timely claim for reimbursement and you must reduce the loss by the amount of the reimbursement.

Business Use of Home

Whether you are self–employed or are an employee, you may be able to deduct certain expenses for the part of your home you use for business despite the general denial of business expense deductions for the home.

Business Use of Car

If you use your car in your job or business and you use it only for that purpose, you may deduct its entire cost of operation (subject to limits discussed here). However, if you use the car for both business and personal purposes, you may deduct only the cost of its business use.

Business Travel Expenses

Travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job. Generally, employees deduct these expenses using Form 2106 or Form 2106-EZ and on Form 1040, Schedule A. You cannot deduct expenses that are lavish or extravagant or that are for personal purposes.

Cook and Company, Enrolled Agents

Copyright © 1994-2010 Cook & Co. Toll-Free Nationwide 1-800-551-6253 or 6254 Main Tel. 256-586-4111 Fax 256-586-4138 Bara Business Center 124 South Main Street Arab, Alabama 35016 Direct Phone Lines From Birmingham: 322-7452 Huntsville: 534-6922 Cook & Co., Enrolled Agents are licensed by the U.S. Treasury Department to represent taxpayers before the Internal Revenue Service (IRS). Greg Cook is a Certified Public Accountant (CPA) licensed by the states of Alabama and Tennessee.

[ Greg Cook ] [ Disclosure ] [ Privacy Policy ] [ Terms of Use ] [ barabusiness.com ]