If you opt to itemize your deductions on your federal income tax return, you'll see a lot of emphasis on saving taxes by not overlooking common deductions. This makes sense because, as a taxpayer, you absolutely have the right to reduce your taxable income by using your available deductions. However, be smart. Make sure you claim those deductions for which you're entitled and steer clear of bogus deductions. To help you out, following is a list of nine deductions that you shouldn't even think about claiming on your tax return:
1.) Reimbursed Job Expenses. It's true that you can deduct business expenses on your federal income tax return so long as they are paid or incurred during your tax year; used for carrying on your trade or business of being an employee; and ordinary and necessary. However, the expenses must also be unreimbursed -- to the extent that your employer pays you back for any of those costs, those portions of the expenses are not deductible.
2.) Diets and Health Club Dues. Most diets and health club dues aren't deductible even if your doctor has recommended that you lose some weight in order to improve your health. While you can deduct medical expenses for the diagnosis, cure, mitigation, treatment or prevention of disease, including the costs of doctors and medications, you cannot deduct the cost of expenses that are merely beneficial to your health -- this includes most diets and health club dues. To be deductible, the diet or exercise plan must be specifically prescribed by a doctor for a diagnosed medical condition, not as preventative care and not just so that you look and feel better. Some limited exceptions apply.
3.) Primary Telephone Landlines. The IRS will allow you to deduct the cost of a second telephone landline or a cell phone to be used in business but you may not deduct the cost of your home telephone line -- even if you use it for business. The IRS considers a primary telephone line routinely personal and thus, not deductible. You may not pro rate the cost of the phone even if you can prove non-personal use. You can, however, deduct long distance and other related charges if you can prove business use.
4.) Home Improvements. At some point, almost every homeowner spends money for some kind of improvements to their home. For the most part, while those improvements may make your home more comfortable (and may increase the cost basis and fair market value of your home), they are generally not deductible. You may still be entitled to a tax break, however: Under current law, you can get a tax credit for the purchase and installation of certain energy-efficient improvements.
5.) Campaign Expenses. Thinking of running for office? To the extent that you have to pay for campaign expenses out of pocket, you're going to have to chalk that up to the cost of public service. Expenses incurred as part of your election campaign aren't deductible on your federal income tax return.
6.) Commuting Costs. While it's true that you can deduct certain travel expenses related to your job (such as traveling from one workplace to another in the course of your job or business; visiting clients, vendors or customers; and going to a business meeting away from your workplace), you can't deduct the costs of commuting to and from work. This is true even if you travel long distances to work (say, from Philadelphia to New York City every day) or if the method of getting to work is expensive (for example, you take a cab).
7.) Charitable Services. While you can deduct the cost of goods and cash that you donate to qualified organizations, you may not deduct the cost of services that you donate to charity, even if you can easily measure the value of those services. You can, however, deduct out of pocket costs that you incur while performing those services.
8.) Pet Care. If you're like me, you may consider your pet a member of your family. However, as much as you may adore your furry (or scaly) addition to the family, he or she does not count as a dependent. You may not deduct the cost of taking care of your pet even if your pet incurs significant medical expenses. An exception applies with respect to guide dogs and service animals -- you can include the costs of buying, training and maintaining those animals as part of your deductible medical expenses.
9.) Attorney's Fees. Attorney's fees may be deductible for businesses, but as a general rule, individual taxpayers cannot deduct most legal fees. This includes attorney's fees related to divorces, disputes over property boundaries and personal injury cases. Those legal disputes are considered personal in nature, which means the IRS won't allow you to take a deduction for them. However, you can deduct personal legal fees that you paid to determine, contest, pay or claim a refund of any tax (including tax advice) as well as those legal fees related to producing or collecting taxable income.
Hope this helps some of you out on your taxes!
Article Author: Kelly Phillips Erb
Saturday, January 22, 2011
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