What is "itemizing"? How can I tell if it will help
me?
You itemize deductions by filing Schedule A with Form 1040. On Schedule A, you list
amounts you paid during the year for certain items such as medical and dental care, state
and local income taxes, real estate taxes, home mortgage interest, and gifts to charity.
If your itemized deductions are more than your standard deduction, your federal income tax
will be less if you itemize. For additional information refer to Tax
Topic 501, Should I Itemize?
My father is in a nursing home and I pay for the entire cost.
Can I deduct this on my tax return?
You may deduct qualified medical expenses you pay for yourself, your spouse, and your
dependents, including a person you claim as a dependent under a Multiple Support
Agreement. You can also deduct medical expenses you paid for someone who would have
qualified as your dependent except that the person did not meet the gross income or joint
return test.
Nursing home expenses are allowable as medical expenses in certain instances. If you,
your spouse, or your dependent is in a nursing home or home for the aged, and the primary
reason for being there is for medical care, the entire cost, including meals and lodging,
is a medical expense. If the individual is in the home mainly for personal reasons, then
only the cost of the actual medical care is a medical expense, and the cost of the meals
and lodging is not deductible.
You must itemize deductions on Schedule A, Form 1040, to claim a medical expense
deduction. You can include only the medical expense paid during the year, regardless of
when the services were provided. Your total medical expense for the year must be reduced
by any insurance reimbursement. Your total medical expenses must be reduced by 7.5% of
your adjusted gross income. You may claim the remainder as an itemized deduction.
For additional information on medical expenses, refer to Tax Topic
502, or Publication 502, Medical and Dental Expenses.
I paid my mother's real estate taxes last year. Can I deduct
this on my tax return?
Generally, you can deduct only taxes that are imposed on you. For additional
information on deductible taxes, refer to Tax Topic 503.
I refinanced my home last year and paid "points". Can
I deduct the entire amount as interest on my return?
No. Points paid solely to refinance your home mortgage cannot be deducted in the year
paid. Instead, they must be deducted over the life of the loan. For more details, refer to
Tax Topic 504, Home Mortgage Points, or Publication
936, Home Mortgage Interest Deduction.
Can I take a deduction for the interest I paid on my student
loan?
For tax years 1997 and prior, education loans are considered to be personal interest,
and can not be deducted. Beginning January 1, 1998, taxpayers who have taken loans to pay
the cost of attending an eligible educational institution may deduct interest they pay on
these student loans. For more details, see Notice
97-60.
I donated a used car to a qualified charity. Do I need to attach
any special forms to my return to take a deduction for a charitable contribution?
You must fill out Section A of Form 8283, Noncash Charitable
Contributions, if your total deduction for all noncash contributions is more than
$500. If you make a contribution of noncash property worth more than $5,000, generally an
appraisal must be done. In that case, you also fill out Section B of Form 8283. Attach
Form 8283 to your return. For a contribution of $250 or more, you can claim a deduction
only if you obtain written acknowledgement from the qualified organization. For more
information on this requirement, refer to Publication 526, Charitable
Contributions. For general information on charitable contributions, refer to Tax Topic 506, Contributions.
Our garage caught fire this last July. Can we claim a loss on
our income tax return?
If you lose property through casualty or theft, you may be entitled to a tax deduction.
A casualty is the damage, destruction, or loss of property resulting from an identifiable
event that is sudden, unexpected, or unusual in nature. Some examples of casualties
include car accidents, fires, and vandalism. If your property is covered by insurance, you
cannot deduct a loss unless you file a timely insurance claim for reimbursement. To claim
a casualty or theft loss, you must complete Form 4684, Casualties
and Thefts, and attach it to your return. A nonbusiness casualty or theft loss may be
claimed only if you itemize deductions on Schedule A, Form 1040. If your loss took place
in a declared disaster area, please refer to Tax Topic 515, Disaster
Area Losses (Including Flood Losses). For additional information, refer to Form 4684,
or Tax Topic 507, Casualty Losses, or Publication
547, Casualties, Disasters, and Thefts (Business and Nonbusiness). If many
items are involved, also refer to Publication 584, Nonbusiness Disaster, Casualty, and
Theft Workbook.
I went through a divorce last year and paid a lot of legal fees.
Are these deductible on my tax return?
Legal fees for the divorce itself and for property settlement are not deductible,
however, legal fees to collect taxable income, such as alimony, are deductible as
miscellaneous itemized deductions on Form 1040, Schedule A. Most miscellaneous itemized
deductions are subject to the 2% limit. This means you can deduct the amount left after
you subtract 2% of your adjusted gross income from their total. For additional
information, refer to Tax Topic 508, Miscellaneous Expenses,
and Publication 529, Miscellaneous Deductions.
I use part of my living room as an office. Can I take a
deduction for business use of my home?
In general, if you use a part of your home for both personal and business purposes, no
expenses for business use of that part are deductible. Exceptions apply for qualified
day-care providers and for the storage of inventory or product samples used in the
business. For additional information on business use of your home, refer to Tax Topic 509, or Publication 587, Business
Use of Your Home (Including Use by Day-Care Providers).
I use my home for business. Can I deduct the expenses?
If you use part of your home exclusively and regularly as the principal place of
business or as a place where you meet or deal with customers you may deduct expenses for
use of part of your home. If you deduct your business expenses on Schedule C (Form 1040),
you must figure your deduction on Form 8829, Expenses for
Business Use of Your Home, and attach it to Form 1040 with Schedule C. For more
information refer to Tax Topic 509, Business Use of Home,
or Publication 587, Business Use of Your Home (Including Use by
Day-Care Providers).
What are the standard mileage rates for 1997?
For 1997, the standard mileage rate is 31.5 cents a mile for all business miles (47.25
cents a mile for U.S. Postal Service employees with rural routes). The rate for moving or
medical reasons is 10 cents a mile. The rate for travel for charitable volunteer work is
12 cents a mile (14 cents in 1998). For more information, refer to Tax
Topic 510, Business Use of Car, or Publication 463, Travel,
Entertainment, and Gift Expenses.
For business travel, are there limits on the amounts deductible
for meals?
Meal expenses are deductible only if your trip is overnight or long enough that you
need to stop for sleep or rest to properly perform your duties. Generally, the deduction
for unreimbursed business meals is limited to 50% of the cost.
Instead of keeping records of your meal expenses and deducting the actual cost, you can
generally deduct a standard meal allowance ranging from $30 to $42 depending on where and
when you travel. For more information on business travel expenses and restrictions, refer
to Tax Topic 511, or Publication 463, Travel,
Entertainment, Gift, and Car Expenses.
Are business gifts deductible?
If you give business gifts in the course of your trade or business, you can deduct the
cost subject to special limits and rules. In general, you can deduct no more than $25 for
business gifts you give directly or indirectly to any one person during your tax year.
Exceptions may apply. For additional information, refer to Tax Topic
512 and Chapter 28 of Publication 17, Your Federal Income Tax.
I took an accounting course in order to keep my salary on my
current job. My employer did not reimburse me for the expenses. Can I take a deduction on
my tax return for the cost of the course?
You may be able to deduct work-related educational expenses as an itemized deduction on
Form 1040, Schedule A. To be deductible, your expenses must be for education that:
- Maintains or improves skills required in your present job, or
- Serves a business purpose and is required by your employer, or by law or regulations, to
keep your salary, status, or job.
Your expenses are not deductible if the education is required to meet the minimum
educational requirements of your job or is part of a program that will lead to qualifying
you in a new trade or business. For additional information on deductible educational
expenses, refer to Tax Topic 513, or Publication
508, Educational Expenses.
I am an employee. What form do I use to claim business expenses
for local transportation?
Generally, you must use Form 2106, Employee Business Expense,
or Form 2106-EZ, Unreimbursed Employee Business Expenses,
to figure your deduction for employee business expenses, and attach if to your Form 1040.
Your deductible expense is then taken to Schedule A, Form 1040, as a miscellaneous
itemized deduction subject to the 2% of adjusted gross income limit. Special rules may
apply, depending on your employer's reimbursement arrangement. For additional information,
refer to Publication 463, Travel, Entertainment, Gift, and Car
Expenses, and Tax Topic 514, Employee Business Expense.
Our home was seriously damaged by flooding last year. Are there
special provisions for claiming a loss since our home is located in a declared disaster
area?
Casualty losses are generally deductible only in the year the casualty occurred.
However, if you have a deductible loss from a disaster in an area that is officially
designated by the President of the United States as eligible for federal disaster
assistance, you can choose to deduct that loss on your return for the year immediately
preceding the loss year. In other words, you may treat the loss as having occurred in
either the current year or the previous year, whichever provides the best tax results for
you. If you have already filed your return for the preceding year, the loss may be claimed
by filing an amended return, Form 1040X. For additional information on disaster area
losses (including flood losses), refer to Tax Topic 515, or Publication 547, Casualties, Disasters and Thefts (Business and
Non-Business). Publication 584, Nonbusiness Disaster, Casualty, and Theft Loss
Workbook, can be used to help you catalog your property.
I am in a disaster area and heard the IRS could help me. What
can the IRS do?
If you have been impacted by a federally declared disaster, the IRS can help you by
delaying collection of taxes you owe and by deferring penalties if the disaster has caused
you to file or pay late. We can provide copies of previously filed tax returns free of
charge, and you may be able to get some money back from the IRS right now. Our disaster
services page, Help During Disasters and Emergencies, provides
more detail, and provides a link to FEMA.
You can also download or order Publication 1600, Disaster Losses - Help from the IRS.
How do I deduct and substantiate my gambling losses?
You can deduct gambling losses only if you itemize deductions. Claim your gambling
losses as a miscellaneous deduction on Schedule A, Form 1040. However, the amount of
losses you deduct cannot total more than the amount of gambling income you have reported
on your return. It is important to keep an accurate diary or similar record of your
gambling winnings and losses. To deduct your losses, you must be able to provide receipts,
tickets, statements or other records that show the amount of both your winnings and
losses.
The Service provides the following guidelines for proving gambling winnings and losses:
- An accurate diary or similar record regularly maintained by the taxpayer, supplemented
by verifiable documentation usually is acceptable evidence for substantiation of wagering
winnings, and losses. In general, the diary should contain at least the following
information:
- date and type of specific wager or wagering activity;
- name of gambling establishment;
- address or location of gambling establishment; and
- name(s) of other person(s) present with you at gambling establishment.
- amount(s) won or lost.
- Verifiable documentation includes, but is not limited to, wagering tickets, canceled
checks, credit records, bank withdrawals, and statements of actual winnings or payment
slips provided by the gambling establishment. When possible, the diary and available
documentation by the placement and settlement of a wager should be supported by such
documentation as hotel bills, airline tickets, gasoline credit cards, or affidavits or
testimony from responsible gambling officials regarding the wagering activity.
Refer to Publication 529, Miscellaneous Deductions for
information on record keeping. For additional information, refer to Publication
525, Taxable and Nontaxable Income.
Where can I find the per diem rates for foreign countries?
The federal per diem rates for these locations are published monthly in the Maximum
Travel Per Diem Allowances for Foreign Areas.
Your employer may have these rates available, or you can purchase the publication from
the:
Superintendent of Documents
U.S. Government Printing Office
P.O. Box 371954
Pittsburgh, PA 15250-7954
You can also order it by calling the Government Printing Office at (202)512-1800 (not a
toll-free number).
Reference(s):RP 96-28 SEC 3.02; PUB 1542
The Foreign Per Diem Rates are available on the Internet at: http://www.state.gov
I just bought a home. What can I deduct from the settlement
statement?
If you bought your home, you probably paid settlement or closing costs in addition to
the contract price. These costs are divided between you and the seller according to the
sales contract, local custom, or understanding of the parties. If you built your home, you
probably paid these costs when you bought the land or settled on your mortgage.
The only settlement or closing costs you can deduct are home mortgage interest and
certain real estate taxes. You deduct them in the year you buy your home if you itemize
your deductions. You can add certain other settlement or closing costs to the basis of
your home. There are some settlement or closing costs that you cannot deduct or add to the
basis.
Real estate taxes are usually divided so that you and the seller each pay taxes for the
part of the property tax year that each owned the home.
You can include in your basis the settlement fees and closing costs that are for buying
your home. You cannot include in your basis the fees and costs that are for getting a
mortgage loan. A fee is for buying the home if you would have had to pay it even if you
paid cash for the home.
See Publication 530, Tax Information for first Time
Homeowners, for more information about settlement or closing costs and determining the
basis of your home.
My spouse and I are filing separate returns. How can we split
our itemized deductions?
If you and your spouse file separate returns and one of you itemizes deductions, the
other spouse will not qualify for the standard deduction and should also itemize
deductions.
You may be able to claim itemized deductions on a separate return for certain expenses
that you paid separately or jointly with your spouse. Deductible expenses that are paid
out of separate funds, such as medical expenses, are deductible by the spouse who pays
them. If these expenses are paid from community funds, the deduction may depends on
whether or not you live in a community property state. In a community property state, the
deduction is divided equally between you and your spouse. Otherwise, see Publication 504, Divorced or Separated Individuals, for how to
allocate the expenses.
See Publication 555, Community Property, for additional
information about community property.
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