What is "itemizing" and is it beneficial
to me?
"Itemizing" is listing on the Schedule
A of Form 1040 all 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.
When you complete your list, you total the
amount spent and compare the total with your standard deduction. The larger
of the two deductions, standard or itemized, will be the deduction to choose,
since it will lower the amount of federal income tax you will owe. 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.
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.
Are they all deductible this year?
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?
Beginning January 1, 1998, taxpayers who have taken loans to pay
the cost of attending an eligible educational institution for themselves,
their spouse, of their dependent generally may subtract from income the
interest they pay on these student loans. See Topic 456, Student Loan Interest
Deduction.
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 1998?
For 1998, the standard mileage rate is 321.5 cents a mile for all
business miles The higher rate for U.S. Postal Service employees with rural
routes has been repealed. The rate for moving or medical reasons is 10
cents a mile. The rate for travel for charitable volunteer work is 14 cents
a mile. 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 Presidentially 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 Federal Emergency Management Agency (FEMA).
We have also assembled a set of forms and publications you can download
for further assistance. There is a set for individuals
and a set for businesses.
Also check Around the Nation for any additional information your
local IRS office may have provided.
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/www/perdiems/
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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