You may be able to deduct work-related educational expenses as an itemized deduction on Schedule A of Form 1040, line 20. 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 present salary, status, or job.

Certain restrictions also apply. For more information, refer to Publication 508 (PDF), Tax Benefits for Work-Related Education; and Tax Topic 513, Educational Expenses.

References:

• Publication 508 (PDF), Tax Benefits for Work-Related Education
• Tax Topic 513, Educational expenses

Deductible educational expenses include amounts spent for tuition, books, supplies, laboratory fees, and similar items. They also include the cost of correspondence courses, as well as formal training and research you do as part of an educational program. Transportation and travel expenses to attend qualified educational activities may also be deductible. For more information, refer to Publication 508 (PDF), Tax Benefits for Work-Related Education; and Tax Topic 513, Educational Expenses.

References:

• Tax Topic 513, Educational Expenses

In some cases, you may be able to deduct the cost of classes you need for work. This deduction, however, would be subject to the 2 percent of AGI floor, along with most other miscellaneous deductions you list on Form 1040, Schedule A (PDF), Itemized Deductions.

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 to keep your present salary, status, or job.

However, these same expenses are not deductible if:

• The education is required to meet the minimum educational requirements of your job, or
• The education is part of a program that will lead to qualifying you in a new trade or business.

Educational expenses, related to your present work, that are incurred during periods of temporary absence from your job may also be deductible provided you return to the same job or same type of work. Generally, absence from work for one year or less is considered temporary.

For more information, refer to Publication 508 (PDF), Tax Benefits for Work-Related Education; and Tax Topic 513, Educational Expenses.

References:

• Publication 508 (PDF), Tax Benefits for Work-Related Education
• Tax Topic 513, Educational Expenses

If you are eligible to deduct educational expenses and are also eligible for the lifetime learning credit, then it is possible to claim both, as long as you do NOT use the same educational expenses to claim both benefits. Your expenses must be divided between the two. This is sometimes desirable because a qualifying expense for one benefit may not be a qualifying expense for the other tax benefit. For more information, refer to Publication 508 (PDF), Tax Benefits for Work-Related Education; Form 8863 (PDF), Education Credit (Hope and Lifetime Learning Credit); and Tax Topic 513, Educational Expenses.

References:

• Publication 970 (PDF), Tax Benefits for Higher Education
• Publication 508 (PDF), Tax Benefits for Work-Related Education
• Tax Topic 513, Educational Expenses
• Form 8863 (PDF), Education Credit (Hope and Lifetime Learning Credits)

You may be able to claim this deduction as long as the position of Advanced Practitioner of Nursing does not constitute a change of trade or business. If the education merely maintains or improves the skills required in your employment and you merely have a change of duties, your expenses would likely be deductible as job education expenses, subject to certain limitations. However, you should consider the relative merits of taking a tax deduction versus taking a tax . Consider the relative merits of taking a tax deduction or taking a tax credit (the Hope and Lifetime Learning Credits) for the same expense. For more information on the Education Credits, including the Hope and Lifetime Learning Credits, refer to Publication 970 (PDF), Tax Benefits for Higher Education. For more information on deducting education expenses, refer to Publication 508 (PDF), Tax Benefits for Work-Related Higher Education; Tax Topic 513, Educational Expenses; and Instructions for Form 2106, Employee Business Expenses

References:

• Publication 970 (PDF), Tax Benefits for Higher Education
• Publication 508 (PDF), Tax Benefits for Work-Related Education
• Tax Topic 513, Educational Expenses
• Form 8863 (PDF), Education Credit (Hope and Lifetime Learning Credits)
• Form 2106 (PDF), Employee Business Expenses

If you itemize deductions you may be able to deduct work-related educational expenses as job expenses which, when combined with your other miscellaneous deductions, are subject to the 2% of adjusted gross income limitation on Form 1040, Schedule A (PDF), Itemized Deductions. 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, to keep your present 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 more information on deductible educational expenses, refer to Tax Topic 513, Educational Expenses; or Publication 508 (PDF),Educational Expenses; Tax Benefits for Work-related Education;, and Instructions for Form 2106, Employee Business Expenses.

References:

• Publication 508 (PDF), Tax Benefits For Work-Related Education
• Form 1040, Schedule A (PDF), Itemized Deductions
• Tax Topic 513, Education Expenses
• Form 2106 (PDF), Employee Business Expense

If your graduate school tuition is deductible and the reimbursements are included in your income as wages, you may take the expense as a miscellaneous itemized deduction on Form 1040, Schedule A (PDF), Itemized Deductions, line 20. You may also need to attach Form 2106 (PDF), Employee Business Expenses. For more information, refer to Publication 508 (PDF), Tax Benefits for Work-Related Education; Tax Topic 513, Educational Expenses; and Form 2106 (PDF), Employee Business Expense.

References:

• Publication 508 (PDF), Tax Benefits for Work-Related Education
• Tax Topic 513, Educational Expenses

Yes, but for 2002, it applies only to benefits you receive for undergraduate courses. With the year 2002, employer-provided educational assistance will include graduate level courses. For more information, refer to Publication 508 (PDF), Educational Expenses.

References:

• Publication 508 (PDF), Educational Expenses
• Publication 970 (PDF), Tax Benefits for Higher Education

Employees, generally, must complete Form 2106 (PDF), Employee Business Expense or Form 2106-EZ (PDF), Unreimbursed Employee Business Expense, when job-related educational expenses involved. Educational expenses are deducted as miscellaneous deductions, on line 20, Form 1040, Schedule A (PDF), Itemized Deductions. Alternatives to educational expense deductions should also be considered, such as the Lifetime Learning and Hope Credits, as discussed in Publication 970 (PDF), Tax Benefits for Higher Education.

Self-employed individuals include educational expenses as deductions on Form 1040 Schedule C (PDF), Profit or Loss From Business; Form 1040, Schedule C-EZ (PDF) , Net Profit from Business; or Form 1040, Schedule F (PDF), Profit or Loss from Farming. For more information, refer to the forms, instructions, and publications listed above plus Tax Topic 513, Educational Expenses, and Tax Topic 605, Education Credits.

References:

• Tax Topic 513, Educational Expenses
• Publication 508 (PDF), Tax Benefits for Work-Related Education
• Publication 970 (PDF), Tax Benefits for Higher Education
• Tax Topic 605, Education Credit
• Form 1040, Schedule A (PDF), Itemized Deduction
• Form 1040, Schedule C (PDF), Profit or Loss From a Business
• Form 1040, Schedule C-EZ (PDF), Net Profit From a Business
• Form 1040, Schedule F (PDF), Profit or Loss From Farming

For more information on educational expenses, refer to Publication 508 (PDF), Tax Benefits for Work-Related Education; Publication 970 (PDF), Tax Benefits for Higher Education; Tax Topic 513, Educational Expenses; and Tax Topic 605, Education Credits.

References:

• Publication 508 (PDF), Tax Benefits for Work-Related Education
• Tax Topic 513, Educational Expenses
• Publication 970 (PDF), Tax Benefits for Higher Education
• Tax Topic 605, Education Credits

Other than a medical deduction for tuition in the case of a special school for physical or mental disability, tuition for primary or secondary education is neither deductible as an educational expense nor as a charitable contribution, and there are no tax credits for the tuition. You cannot take a charitable deduction for tuition, or for amounts you pay instead of tuition, even if you pay them for children to attend parochial schools or qualifying nonprofit day-care centers. You also cannot deduct any fixed amount you may be required to pay in addition to the tuition fee to enroll in a private school, even if it is designated as a "donation." For more information, refer to Publication 526 (PDF) , Charitable Contributions.

Starting in 2002, you can use distribution from a Coverdell Education Savings Account (formerly, Education IRA) for primary school tuition if other requirements are met. For more information, refer to Publication 970 (PDF), Tax Benefits for Higher Education; andTax Topic 310 Coverdell Education Savings Accounts.

References:

• Tax Topic 513, Educational expenses
• Publication 526 (PDF), Charitable Contributions
• Publication 508 (PDF), Tax Benefits for Work-Related Education
• Publication 970 (PDF), Tax Benefits for Higher Education

There is no deduction for your child's homeschooling expenses. These are nondeductible personal, living, or family expenses. For more information, refer to Publication 529 (PDF), Miscellaneous Deductions.

References:

• Publication 529 (PDF), Miscellaneous Deduction

The expense would not be deductible as an education or a child care expense. The facts and circumstances will determine if the cost of the private school qualifies as a medical expense.

Under limited circumstances, you may be able to treat as medical expenses all or part of the tuition or fees you pay to a special school for a child who has severe learning disabilities caused by mental or physical impairments, including nervous system disorders. Refer to Publication 502 (PDF), Medical and Dental Expenses. Your doctor must recommend that the child attend the school, and the main reason for using the school must be its resources for relieving the disability.

References:

• Publication 502 (PDF), Medical and Dental Expenses
• Tax Topic 502, Medical and Dental Expenses

The costs of a child's music or swimming lessons are not deductible. These are nondeductible personal, living, or family expenses. For more information, refer to Publication 529 (PDF), Miscellaneous Deductions.

References:

• Publication 529 (PDF), Miscellaneous Deductions

No, you cannot claim the student loan interest deduction on Form 1040EZ (PDF). To claim a student loan interest deduction, U.S. citizens and residential aliens must file either Form 1040 (PDF) or Form 1040A (PDF). For more information on which form to file, refer to Publication 17 (PDF), Your Federal Income Tax for Individuals.

References:

• Publication 970 (PDF), Tax Benefits for Higher Education
• Tax Topic 505, Interest Expenses
• Tax Topic 513, Educational Expenses
• Publication 17 (PDF), Your Federal Income Tax for Individuals

Starting in 1998, taxpayers who have taken out qualified loans to pay certain costs of attending an eligible educational institution for themselves, their spouse, or their dependent are allowed to take a deduction from gross income for the interest they paid on these student loans. Prior to 2002, deduction of student loan interest was limited to the first 60 months of required interest payments, and, was subject to income limitations. Beginning in 2002, interest paid over any period of time on a qualified education loan is deductible. There are also income limits. For more information, refer to Publication 970 (PDF), Tax Benefits for Higher Education; and Tax Topic 456, Student Loan Interest Deduction.

References:

• Publication 970 (PDF), Tax Benefits for Higher Education
• Tax Topic 456, Student Loan Interest Deduction

The maximum deductible interest on a qualified student loan is $2,500 per return. If you are a taxpayer whose return status is married filing jointly, you are allowed to deduct the full $2,500 only when your Modified Adjusted Gross Income (MAGI) is $100,000 or less. If your MAGI is between $100,000 and $130,000, the amount of your student loan interest deduction is gradually reduced. The instructions for Form 1040 (PDF) show you how to compute the deduction. If your MAGI is $130,000 or more, you are not able to take any deduction.

For those whose filing status is single, head of household, or qualifying widow(er), the full $2,500 deduction is allowed for MAGI levels equal to or below $50,000. For MAGI between $50,000 and $65,000, the deduction amount is phase out, and computation instructions are provided in the Instructions for Form 1040. If your MAGI amount is, $65,000 or more, there is no deduction.

There is no deduction if you file as married filing separately, if you are claimed as a dependent, or if the loan is from a related party or a qualified employer plan. For more information, refer to Publication 970 (PDF), Tax Benefits for Higher Education; Tax Topic 505, Interest Expense; and Tax Topic 513, Educational Expenses.

References:

• Publication 970 (PDF), Tax Benefits for Higher Education
• Tax Topic 505, Interest Expense
• Tax Topic 513, Educational Expenses

The deduction is limited to $2,500 per return for tax year 2001 and beyond. If you file as "married filing separately," there is no deduction. For more information, refer to Publication 970 (PDF), Tax Benefits for Higher Education; and Tax Topic 505, Interest Expense.

References:

• Publication 970 (PDF), Tax Benefits for Higher Education
• Tax Topic 505, Interest Expense
• Tax Topic 513, Educational Expenses

No, you cannot claim the deduction in any tax year in which your filing status is "married filing a separate return." For more information, refer to Publication 970 (PDF), Tax Benefits for Higher Education, Tax Topic 505, Interest Expense; and Tax Topic 513, Educational Expenses.

References:

• Publication 970 (PDF), Tax Benefits for Higher Education
• Tax Topic 505, Interest Expense
• Tax Topic 513, Educational Expenses

If your daughter was your dependent when you received the loan, the interest you paid on the loan is deductible, provided all other requirements are met. For more information, refer to Publication 970 (PDF), Tax Benefits for Higher Education; Tax Topic 505, Interest Expense; andTax Topic 513, Educational Expense.

References:

• Publication 970 (PDF), Tax Benefits for Higher Education
• Tax Topic 505, Interest Expense
• Tax Topic 513, Educational Expenses

You will not be able to take a deduction for the student loan interest that you pay because you are not the one obligated to pay on the loan. However, your mother may take the deduction, provided all other requirements for the deduction are met. The payment made by you is treated as a gift to her, and then a payment by her. For more information, refer to Publication 970 (PDF), Tax Benefits for Higher Education; Tax Topic 505, Interest Expense; and Tax Topic 513, Educational Expenses.

References:

• Publication 970 (PDF), Tax Benefits for Higher Education
• Tax Topic 505, Interest Expenses
• Tax Topic 513, Educational Expenses

In order for a taxpayer to claim a deduction for student loan interest, the loan must be incurred for the taxpayer, the taxpayer' spouse, or a person who was the taxpayer's dependent when the taxpayer took out the loan. Since you were not your parents' dependent when they took out the student loan, the interest they paid on the loan does not qualify for deduction. However, the student loan interest payments you made on the student loan you took out on your behalf are eligible for deduction, provided all the other requirements are met. For more information, refer to Publication 970 (PDF), Tax Benefits for Higher Education; Tax Topic 505, Interest Expense; and Tax Topic 513, Educational Expenses.

References:

• Publication 970 (PDF), Tax Benefits for Higher Education
• Tax Topic 505, Interest Expense
• Tax Topic 513, Educational Expenses

Generally, you must use Form 2106 (PDF), Employee Business Expenses, or Form 2106-EZ (PDF), Unreimbursed Employee Business Expenses, to claim a deduction for employee business expenses. Your deductible expense is then taken on line 20 of Form 1040, Schedule A (PDF) , as a miscellaneous itemized deduction, subject to the 2% of adjusted gross income floor. Special rules may apply, depending on the reimbursement arrangement you have with your employer. For additional information, refer to Publication 463 (PDF), Travel, Entertainment, Gift, and Car Expenses, Tax Topic 514, Employee Business Expenses, and Publication 529 (PDF), Miscellaneous Deductions.

References:

• Publication 463 (PDF), Travel, Entertainment, Gift, and Car Expenses
• Form 1040 (PDF), U.S. Individual Income Tax Return
• Form 1040, Schedule A (PDF), Itemized Deductions
• Form 2106 (PDF), Employee Business Expenses
• Form 2106-EZ (PDF), Unreimbursed Employee Business Expenses
• Tax Topic 514, Employee Business Expense
• Publication 529 (PDF), Miscellaneous Deductions

When moving expenses coincide closely with a job transfer or the start of a new job, some of those expenses may qualify for deduction as an adjustment to income on Form 1040 (PDF), U.S. Individual Income Tax Return. You must have moved far enough, and, generally, closer to your new job than you were before you moved. You must have started and kept full-time work for a specific period after the move. Not all moving expenses are deductible. Deductible expenses are generally limited to one-way transportation, including lodging, of your household members along the most direct route to your new residence, and transportation, parking and storage of household goods. You cannot deduct a reimbursed expense, unless the reimbursement has been counted in your wages. For more information, refer to Publication 521 (PDF), Moving Expenses; Tax Topic 455, Moving Expenses; and the Instructions for Form 3903 (PDF), Moving Expenses.

References:

• Publication 521 (PDF), Moving Expenses
• Form 3903 (PDF), Moving Expenses
• Tax Topic 455, Moving Expenses
• Instructions for Form 3903 (PDF), Moving Expenses

If you claim a deduction on your return of over $500 for all contributed property, you must attach a Form 8283 (PDF), Noncash Charitable Contributions, to your return. If you claim a total deduction of $5,000 or less for all contributed property, you need only complete Section A of Form 8283. If you claim a deduction of more than $5,000 for an item or a group of similar items, you generally need to complete Section B of Form 8283 which requires a qualified appraisal by a qualified appraiser.

You will need to obtain and keep evidence of your car donation and be able to substantiate the fair market value of the car. If you are claiming a deduction of $250 or more for the car donation, you will also need a written acknowledgement from the charity that includes a description of the car and a statement of whether the charity provided any goods or services in return for the car and, if so, a description and estimate of the fair market value of the goods or services.

For more information on these requirements, refer to Publication 526 (PDF), Charitable Contributions,Publication 561 (PDF), Determining the Value of Donated Property; Form 8283, Noncash Charitable Contributions; and its instructions, and Tax Topic 506, Contributions.

References:

• Publication 526 (PDF), Charitable Contributions
• Form 8283 (PDF), Noncash Charitable Contributions
• Tax Topic 506, Contributions
• Form 1040, Schedule A (PDF) , Itemized Deductions

Interest and penalties paid to the IRS on Federal taxes are not deductible. For more information, refer to Items You Cannot Deduct in Chapter 25 of interest expense Publication 17 (PDF), Your Federal Income Tax for Individuals; and Tax Topic 505, Interest Expense.

References:

• Publication 17 (PDF), Your Federal Income Tax for Individuals
• Tax Topic 505, Interest Expense

The Applicable Federal Rates for each month can be found in the first weekly Internal Revenue Bulletin (IRB) published for that month. The Internal Revenue Bulletins are located on the IRS web-site called the "Digital Daily," under Tax Information for You . The Digital Daily may be accessed at http://www.irs.gov.

References:

• Applicable Federal Rates
• Tax Information for You
• http://www.irs.gov

The rules for private or "below market" loans may be found in Publication 550 (PDF), Investment Income and Expenses. To calculate the lowest acceptable rate of interest under federal tax law, you must use the Applicable Federal Rates (AFR) that apply based on the terms and period of your loan. The applicable federal rates are published monthly in the Internal Revenue Bulletin. The Internal Revenue Bulletins may be found on the IRS' web-site, the Digital Daily, under Tax Information for You. You may access the web-site at http://www.irs.gov

References:

• Applicable Federal Rates
• Publication 550 (PDF), Investment Income and Expenses
• http://www.irs.gov

If, in a true debtor-creditor relationship, someone owes you money that you cannot collect, you have a bad debt. There are two kinds of bad debts - business and nonbusiness.

Bad debts are deductible only if the amount owed to you represents a loan of your cash or has been previously included in your income. A business bad debt, generally, is one that comes from operating your trade or business. All other bad debts are nonbusiness.

Nonbusiness bad debts must be totally worthless to be deductible. You cannot deduct a partially worthless nonbusiness bad debt. You must establish that you have taken reasonable steps to collect the debt and that the debt is worthless. You may take the deduction only in the year the debt becomes totally worthless. A debt becomes totally worthless when there is no longer any chance the amount owed will be paid. You do not have to wait until the debt comes due. A nonbusiness bad debt is taken as a short-term capital loss on Form 1040, Schedule D (PDF), Capital Gains and Losses.

For more information on bad debts, refer to Publication 550 (PDF), Investment Income and Expenses, and Publication 535 (PDF), Business Expenses.

Form 1040, Schedule D (PDF), Capital Gains and Losses.

References:

• Publication 550 (PDF), Investment Income and Expenses
• Publication 535 (PDF), Business Expenses

Personal legal fees are not, generally, deductible. However you may deduct legal fees incurred or paid for the production or collection of taxable income. The portion of the legal fees that is deductible would be proportional to the taxable part of your Social Security benefit collected. The deduction is taken on line 22 of Form 1040 Schedule A (PDF), Itemized Deductions, subject to the 2% of Adjusted Gross Income Limitation. For more information, refer to Publication 529 (PDF), Miscellaneous Deductions; and Publication 915 (PDF), Social Security and Equivalent Railroad Retirement Benefits.

References:

• Publication 529 (PDF), Miscellaneous Deductions
• Publication 915 (PDF), Social Security and Equivalent Railroad Retirement Benefits

Legal fees incurred or paid for a divorce are personal in nature, and are not generally deductible. However, legal fees incurred or paid for the production or collection of taxable income may be deductible. You may deduct legal fees for collecting alimony because alimony is taxable income. These deductions are taken on line 22 of Form 1040, Schedule A (PDF), Itemized Deductions. For additional information, refer to Tax Topic 508, Miscellaneous Expenses, and Publication 529 (PDF), Miscellaneous Deductions.

References:

• Publication 529 (PDF), Miscellaneous Deductions
• Form 1040, Schedule A (PDF), Itemized Deductions
• Tax Topic 508, Miscellaneous Expenses

If you are divorced or separated, you may be able to deduct the alimony or separate maintenance payments that you are required to make to your spouse or former spouse, or on behalf of that spouse. For additional information, refer to Tax Topic 452, Alimony Paid (this topic covers alimony under decrees or agreements after 1984; and Publication 504 (PDF), Divorced or Separated Individuals.

References:

• Publication 504 (PDF), Divorced or Separated Individuals
• Tax Topic 452, Alimony Paid

If they are deductible, investment expenses other than investment interest are taken as miscellaneous deductions on Form 1040, Schedule A (PDF), Itemized Deductions. These deductions must be reduced by 2% of your adjusted gross income.

Commissions and fees for the acquisition or sale of an asset are added to the basis of that asset and are not deductible. For example, acquisition fees, sales commissions, and load charges paid in connection with the purchase or selling of mutual fund shares are not deductible. They can usually be added to the basis of the shares.

Fees for managing investments, such as custodial fees and management fees, are deductible. Fees you pay a broker to collect taxable bond interest or stock dividends are deductible. Fees that pass through to you from non-publicly offered mutual funds, partnerships, or trusts are deductible. All of these fees are subject to the 2% limit. For more information, refer to Publication 529 (PDF), Miscellaneous Deductions; Publication 550 (PDF), Investment Income and Expenses; and Publication 564 (PDF), Mutual Fund Distributions.

References:

• Publication 17 (PDF), Your Federal Income Tax for Individuals
• Publication 529 (PDF), Miscellaneous Deductions
• Publication 550 (PDF), Investment Income and Expenses
• Publication 564 (PDF), Mutual Fund Distributions

If you borrow money and use it to buy property you hold for investment, the interest you pay is deductible as investment interest subject to certain limits. However, you cannot deduct interest you incurred to produce tax-exempt income. Investment interest does not include any qualified home mortgage interest or any interest taken into account in computing income or loss from a passive activity. For more information, refer to Publication 564 (PDF), Investment Income and Expenses; Tax Topic 505, Interest Expense; and Publication 925 (PDF), Passive Activity and At-Risk Rules.

References:

• Publication 550 (PDF), Investment Income and Expenses
• Tax Topic 505, Interest expenses
• Publication 925 (PDF), Passive Activity and At-Risk Rules

If you are a cash method taxpayer, you can deduct interest on margin accounts to buy taxable securities as investment interest in the year you pay it. You are considered to have paid interest on these accounts only when you actually pay the broker or when payment becomes available to the broker through your account. Payment may become available to the broker through your account when the broker collects dividends or interest for your account, or sells securities held for you or received from you. You cannot deduct any interest on money borrowed for personal reasons. Investment interest deductions are limited to the extent of investment income. The deductions amount is reported on Form 4952 (PDF), Investment Interest Deduction. The deduction is then taken as an itemized deduction on line 13 of Form 1040, Schedule A (PDF), Itemized Deductions. For more information, refer to Publication 550 (PDF), Investment Income and Expenses.

References:

• Publication 17 (PDF), Your Federal Income Tax
• Tax Topic 505, Interest Expenses
• Publication 550 (PDF), Investment Income and Expenses
• Form 4952 (PDF), Investment Interest Deduction

Investment expenses for individuals must be taken as itemized deductions. Investment expenses (other than interest expenses) are deducted on Form 1040, Schedule A (PDF), Itemized Deductions, as miscellaneous deductions subject to the 2% of your Adjusted Gross Income (AGI) limit. Investment Interest, such as margin interest, is reported on Form 4952 (PDF) , Investment Interest Deduction, and on Form 1040, Schedule A Itemized Deductions, but is not subject to the 2% of your Adjusted Gross Income (AGI) limit. For more information, refer to Publication 550 (PDF), Investment Income and Expenses; Publication 529 (PDF), Miscellaneous Deductions; and Tax Topic 508, Miscellaneous Expenses.

References:

• Publication 550 (PDF), Investment Income and Expenses
• Form 4952 (PDF), Investment Interest Deduction
• Tax Topic 508, Miscellaneous Expenses
• Publication 529 (PDF), Miscellaneous Deductions

You can deduct gambling losses only if you itemize deductions. Claim your gambling losses as a miscellaneous deduction on line 27 of Form 1040, Schedule A (PDF), Itemized Deductions. They are not subject to the 2% limit of your Adjusted Gross Income. 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;
  • name(s) of other person(s) present with you at gambling establishment; and
  • 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 generated with 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.

For more information refer to Publication 529 (PDF), Miscellaneous Deductions; and Publication 525 (PDF), Taxable and Nontaxable Income.

References:

• Publication 525 (PDF), Taxable and Nontaxable Income
• Publication 529 (PDF), Miscellaneous Deductions
• Form 1040, Schedule A (PDF), Itemized Deductions

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 for the purpose of taking personal exemptions 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, 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 deduct medical expenses on Form 1040, Schedule A (PDF), Itemized Deductions. The total of all allowable medical expenses must be reduced by 7.5% of your Adjusted Gross Income. For more information, refer to Publication 502 (PDF), Medical and Dental Expenses.

References:

• Publication 502 (PDF), Medical and Dental Expenses

There are no special deductions for providing money to assist your aging parent. However, you may want to review the tests in Publication 501 (PDF), Exemptions, Standard Deduction, and Filing Information, to see whether you would be eligible to claim your mother as a dependent.

References:

• Publication 501 (PDF), Exemptions, Standard Deduction, and Filing Information
• Tax Topic 354, Dependents

Social Security taxes and Medicare taxes imposed on employees are not deductible as medical insurance or pursuant to any other provision. Medicare A expense is not generally deductible. However, If you itemize your deductions on Form 1040, Schedule A (PDF), Itemized Deductions, you may be able to deduct the monthly premiums paid from your social security check as medical expense.

If you have voluntarily enrolled in Medicare A because you were not otherwise covered, you can deduct your Medicare A premiums. If you are enrolled in Medicare B supplemental medical insurance, the premiums you pay can be deducted as a medical expense. All allowable medical expenses must be reduced by 7.5% of adjusted gross income. For more information, refer to Publication 502 (PDF), Medical Expenses; and Tax Topic 502, Medical and Dental Expenses.

References:

• Publication 502 (PDF), Medical and Dental Expenses
• Tax Topic 502, Medical and Dental Expenses

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, points that represent interest and certain real estate taxes. You, may, deduct them in the year you buy your home if you itemize your deductions. 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 add certain other settlement or closing costs to the basis of your home. You include in your basis the settlement fees and closing costs that are for buying your home. A fee is for buying the home if you would have had to pay it even if you paid cash for the home

There are some settlement or closing costs that you cannot deduct or add to the basis of your home. These include fees and costs that are for getting a mortgage loan. For more information refer to Publication 530 (PDF), Tax Information for First Time-Homeowners, and Publication 936 (PDF),Home Mortgage Interest Deduction

References:

• Publication 530 (PDF), Tax information for First-Time Homeowners
• Publication 936 (PDF), Home Mortgage Interest Deduction

Unless you have begun construction of a home on the bare land that you can occupy within 24 months, the land would be considered an investment and the interest you paid on the second mortgage would not qualify as deductible mortgage interest. However, it would constitute investment interest if you itemize your deductions. For more information, refer to Publication 550 (PDF), Investment Income and Expenses, and Publication 936 (PDF), Home Mortgage Interest Deduction.

References:

• Publication 550 (PDF), Investment Income and Expenses
• Tax Topic 505, Interest expense

Generally, you can deduct only taxes that are imposed on you. You cannot deduct the property taxes unless you are the legal owner of the property, nor the mortgage interest unless you are legally liable for the loan. Your mother cannot deduct the mortgage interest either because she did not make the payments. For more information, refer to Publication 936 (PDF), Home Mortgage Interest Deduction; Publication 17 (PDF), Your Federal Income Tax for Individuals; and Tax Topic 505, Interest Expenses; and Tax Topic 503, Deductible Taxes.

References:

• Publication 936 (PDF), Home Mortgage Interest Deduction
• Tax Topic 505, Interest Expense
• Tax Topic 503, Deductible Taxes
• Publication 17 (PDF), Your Federal Income Tax for Individuals

In order for both of you to claim one-half of the interest deduction, both of you must be legally liable for the loan. Since only your daughter is legally liable for the loan, only she can deduct the interest she paid. Since both of you are legal owners of the property, both of you may deduct one-half of the real estate taxes paid during the year. For more information, refer to Publication 936 (PDF), Home Mortgage Interest Deduction; Publication 17 (PDF), Your Federal Income Tax for Individuals; Publication 530 (PDF), Tax Information for First Time Homeowners; Tax Topic 505, Interest Expense; and Tax Topic 503, Deductible Taxes.

References:

• Publication 936 (PDF), Home Mortgage Interest Deduction
• Publication 17 (PDF), Your Federal Income Tax for Individuals
• Publication 530 (PDF), Tax Information for First-Time Homeowners
• Tax Topic 505, Interest Expense
• Tax Topic 503, Deductible Taxes

You may deduct Home Equity Debt Interest, as an itemized deduction, if you legally liable to pay the interest, pay the interest in the tax year, secure the debt with your home, and do not exceed your Home Equity Debt Limit. For more information, refer to Publication 936 (PDF), Home Mortgage Interest; and Tax Topic 505, Interest Expense.

References:

• Publication 936 (PDF), Home Mortgage Interest Deduction
• Tax Topic 505, Interest Expense

Points paid to refinance your home are not, deductible in their entirety in the year paid. They are "amortized" or deducted over the life of the loan. For more information, refer to Publication 936 (PDF) , Home Mortgage Interest Deduction, and Tax Topic 504, Home Mortgage Points.

References:

• Publication 936 (PDF), Home Mortgage Interest Deduction
• Tax Topic 504, Home Mortgage Points

Generally, the interest paid on the loan incurred for purchasing a lot is not deductible as mortgage interest.

If you are planning to build a house, you can start deducting mortgage interest once construction begins. The following is from Publication 936 (PDF), Home Mortgage Interest Deduction:

You can treat a home under construction as a qualified home for a period of up to 24 months, but only if it becomes your qualified home at the time it is ready for occupancy. The 24-month period can start any time on or after the day construction begins. For more information, refer to Publication 936 (PDF), Home Mortgage Interest Deduction; and Tax Topic 505, Interest Expense.

References:

• Publication 936 (PDF), Home Mortgage Interest Deduction
• Tax Topic 505, Interest Expenses

Interest on the mortgage secured by bare land is not, generally, deductible as mortgage interest. In order for interest to be deductible as home mortgage interest, the loan must be secured by a qualified residence. A qualified residence is your principal residence or one other residence selected by you that you use as a residence.

Once you start construction of your home, you may treat the home under construction as a qualified residence for a period of up to 24 months, but only if the home becomes a qualified residence at the time it is ready for occupancy. For more information, refer to Publication 936 (PDF), Home Mortgage Interest Deduction; and Tax Topic 505, Interest Expense.

References:

• Publication 936 (PDF), Home Mortgage Interest Deduction
• Tax Topic 505, Interest Expense

You can treat a home under construction as a home qualifying for the home interest deduction for a period of up to 24 months, but only if it becomes your qualified home at the time it is ready for occupancy. For more information, refer to Publication 936 (PDF), Home Mortgage Interest Deduction; and Tax Topic 505, Interest Expense.

References:

• Publication 936 (PDF), Home Mortgage Interest Deduction
• Tax Topic 505, Interest Expense

All three loans may have some deductible interest. Generally, the interest paid on a financed lot is not deductible as mortgage interest. There might be a deduction for investment interest until construction of the home begins. Once construction begins, you can, deduct mortgage interest on the construction loan for up to 24 months. Once the home has been completed and occupied by you, and the two existing loans have been refinanced, you may deduct the interest from the new mortgage. For more information, refer to Publication 936 (PDF), Home Mortgage Interest Deduction; Tax Topic 505, Interest Expense; and Publication 550 (PDF), Investment Income and Expenses.

References:

• Publication 936 (PDF), Home Mortgage Interest Deduction
• Publication 550 (PDF), Investment Income and Expenses
• Tax Topic 505, Interest Expense

Until you started construction, the interest on the loan to purchase the lot was not deductible as mortgage interest. Once you started construction on the property, it became deductible as home mortgage interest provided that the loan was secured by the house, and all other conditions for deductibility of home mortgage interest were met. For more information, refer to Publication 936 (PDF), Home Mortgage Interest Deduction and Tax Topic 505, Interest Expense.

References:

• Publication 936 (PDF), Home Mortgage Interest Deduction
• Tax Topic 505, Interest Expense

A loan taken out for reasons other than to buy, build, or substantially improve your home, such as to pay off personal debts may qualify as home equity debt. The interest would be deducted on line 10, Form 1040, Schedule A (PDF), Itemized Deductions. You may not deduct interest on any amount of home equity debt that exceeds your Home Equity Debt Limit. For more information, refer to Publication 936 (PDF), Home Mortgage Interest Deduction; and Tax Topic 505, Interest Expense.

References:

• Publication 936 (PDF), Home Mortgage Interest Deduction
• Tax Topic 505, Interest Expense

The interest you pay on money you borrow from 401(K) plan to buy a home is not deductible as mortgage interest, because the loan is not secured by the home. The mortgage must be a secured debt on a qualified home. Your mortgage is a secured debt if you put your home up as collateral to protect the interests of the lender. The term "qualified home" means your main home or second home. For details, refer to Publication 936 (PDF) , Home Mortgage Interest Deduction and Tax Topic 505, Interest Expense.

References:

• Publication 936 (PDF), Home Mortgage Interest Deduction
• Tax Topic 505, Interest Expense

Home improvements add to the value of your home, prolong its useful life, or adapt it to new uses. Home improvements costs are not deductible. However, you add the cost of improvements to the basis of your property.

Examples of improvements include putting a recreation room in your unfinished basement, adding another bathroom, or bedroom, putting up a fence, putting in new plumbing or wiring, putting on a new roof, or paving your driveway.

For a list of some other examples of improvements, refer to Publication 523 (PDF), Selling Your Home.

Repairs maintain your home in good condition. They are not currently deductible nor do they add to your home's value or prolong its life. You do not add their cost to the basis of your property.

Some examples of repairs include repainting your house inside or outside, fixing your gutters or floors, repairing leaks or plastering and replacing broken window panes.

Exception: The entire job is considered an improvement, however, if items that would otherwise be considered repairs are done as part of an extensive remodeling or restoration of your home. For more information, refer to Publication 523 (PDF); Selling Your Home; and Publication 551 (PDF), Basis of Assets.

References:

• Publication 523 (PDF), Selling Your Home
• Publication 551 (PDF), Basis of Assets

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 (PDF), Amended U.S. Individual Income Tax Return. For more information on disaster area losses (including flood losses), refer to Tax Topic 515 , Disaster Area Losses (Including Flood Losses), or Publication 547 (PDF), Casualties, Disasters and Thefts (Business and Non-Business). Publication 584 (PDF), Casualty, and Theft Loss Workbook, can be used to help you catalog your property.

References:

• Publication 547 (PDF), Casualties, Disasters and Thefts (Business and Non-Business)
• Publication 584 (PDF), Casualty Disaster, and Theft Loss Workbook
• Form 1040X (PDF), Amended U.S. Individual Income Tax Return
• Tax Topic 515, Disaster Area Losses (Including Flood Losses)

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 (PDF), Casualties and Thefts, and attach it to your return. Claim the amount from the form on line 19 of Form 1040, Schedule A (PDF), Itemized Deductions. If your loss took place in a declared disaster area, please refer to Tax Topic 515, Disaster Area Losses (Including Flood Losses). For more information, refer to Form 4684, Casualties and Thefts, or Tax Topic 507, Casualty Losses, or Publication 547 (PDF), Casualties, Disasters, and Thefts (Business and Non-business). If many items are involved, also refer to Publication 584 (PDF), Casualty, Disaster, and Theft Loss Workbook.

References:

• Publication 547 (PDF), Casualties, Disasters, and Thefts (Business and Non-business)
• Publication 584 (PDF), Casualty, Disasters, and Theft Loss Workbook
• Form 1040, Schedule A (PDF), Itemized Deductions
• Form 4684 (PDF), Casualties and Thefts
• Tax Topic 507, Casualty Losses
• Tax Topic 515, Disaster Area Losses (Including Flood Losses)

No. Personal interest is not deductible. For more information, refer to Publication 17 (PDF), Your Federal Income Tax for Individuals; and Tax Topic 505, Interest Expense.

References:

• Publication 17 (PDF), Your Federal Income Tax
• Publication 529 (PDF), Miscellaneous Deductions
• Tax Topic 505, Interest Expense

The mortgage interest on a second home which you use as a residence for some portion of the taxable year, is generally deductible if the interest satisfies the same requirements for deductibility as interest on a primary residence. Real estate taxes paid on your primary and second residence are, generally, deductible. Deductible real estate taxes include any state, local, or foreign taxes on real property levied for the general public welfare. Deductible real estate taxes do not include taxes charged for local benefits and improvements that increase the value of the property. For more information, refer to Publication 17 (PDF), Your Federal Income Tax for Individuals; Tax Topic 503, Deductible Taxes; and Publication 530 (PDF), Tax Information for First-Time Home Buyers.

References:

• Publication 936 (PDF), Home Mortgage Interest Deduction
• Publication 530 (PDF), Tax Information for First-Time Homeowners
• Publication 17 (PDF), Your Federal Income Tax for Individuals
• Tax Topic 503, Deductible Taxes
• Tax Topic 505, Interest Expense

You can deduct the interest paid on the loan you took out to purchase the trailer as acquisition indebtedness interest only if the loan is secured by the trailer and the trailer meets the requirements of a qualified home. A qualified home includes a house, condominium, cooperative, mobile home, boat or similar property that has sleeping, cooking and toilet facilities. You can only have one principal residence and one qualified second home. Regardless of whether the trailer qualifies as a home, interest on home equity indebtedness secured by another qualified home and used to acquire the trailer may also be deductible. The interest is deducted as mortgage interest on line 11 of Form 1040, Schedule A (PDF), Itemized Deductions.

References:

• Publication 936 (PDF), Home Mortgage Interest Deduction
• Tax Topic 505, Interest Expense

For you to take a home mortgage interest deduction, your debt must be secured by a qualified home. This means your main home or your second home. A home includes a house, condominium, cooperative, mobile home, boat, or similar property that has sleeping, cooking, and toilet facilities.

The mortgage interest on a manufactured home may be deducted if the home is on a rented lot. If you buy a lot and place a manufactured home on it, the interest paid for the lot is also qualifying home mortgage interest, provided the mortgage is secured by the house.

References:

• Publication 936 (PDF), Home Mortgage Interest Deduction
• Tax Topic 505, Interest Expense

Deductible fees are limited to home mortgage interest and certain real estate taxes. Points that represent interest on a refinancing are amorized over the life of the loan.

Fees that are not associated with the acquisition of a loan may only have effect on the basis of the home. An example would be a transfer tax that would be charged regardless of whether a loan was involved.

Fees related to the acquisition of a loan are not deductible and are not basis adjustments. A credit report fee is a good example.

For more information, refer to Publication 936 (PDF), Home Mortgage Interest Deduction; Tax Topic 504, Home Mortgage Points; and Publication 551 (PDF), Basis of Assets.

References:

• Publication 936 (PDF), Home Mortgage Interest Deduction
• Tax Topic 504, Home Mortgage Points
• Publication 551 (PDF), Basis of Assets

Points that represent interest paid for a refinanced mortgage have to be amortized over the life of the loan. Points charged for specific services, such as preparation costs for a mortgage note, appraisal fees, or notary fees are not interest and cannot be deducted. It is possible to deduct a larger percentage of the points in the first year if a portion of the mortgage proceeds is used to improve the home and sufficient cash is added to the transaction to be equal to or greater than the amount of the points. Certain other restrictions apply. For more information, refer to Publication 936 (PDF), Home Mortgage Interest Deduction; and Tax Topic 504, Home Mortgage Points.

References:

• Publication 936 (PDF), Home Mortgage Interest Deduction
• Tax Topic 504, Home Mortgage Points

You need to divide the points by the number of payments over the term of the loan and deduct points for a year according to the number of payments made in the year. If the loan ends prematurely, due to payoff or refinance, for example, then the remaining points are deducted in that year. Points not included in Form 1098 (PDF) (usually not included on a refinance) should be entered on line 12 of Form 1040, Schedule A (PDF), Itemized Deductions. For more information, refer to Publication 936 (PDF), Home Mortgage Interest Deduction; and Tax Topic 504, Home Mortgage Points.

References:

• Publication 936 (PDF), Home Mortgage Interest Deduction
• Tax Topic 504, Home Mortgage Points
• Form 1040, Schedule D (PDF), Itemized Deductions

If you spread your deduction of the points over the life of the mortgage, you can deduct any remaining balance of the points in the year the mortgage ends. A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event.

Under the conditions described in the question, the $984 would be deductible in the year the mortgage ended. You would report the deduction on Form 1040, Schedule A (PDF), Itemized Deductions. For more information, refer to Publication 936 (PDF), Home Mortgage Interest Deduction; and Tax Topic 504, Home Mortgage Points.

References:

• Publication 936 (PDF), Home Mortgage Interest Deduction
• Tax Topic 504, Home Mortgage Points
• Form 1040, Schedule D (PDF), Itemized Deductions

Itemization is the process of listing specific deductible personal expenses you paid during the year including but not limited to medical and dental care, state and local income taxes, real estate taxes, home mortgage interest, and gifts to charity. Such a list would appear on Form 1040, Schedule A (PDF), Itemized Deductions.

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?

References:

• Form 1040, Schedule A (PDF), Itemized Deductions
• Tax Topic 501, Should I Itemize?
• Publication 17 (PDF), Your Federal Income Tax For Individuals

If you and your spouse file separate returns and one of you itemizes deductions, the other spouse will have a standard deduction of zero. Therefore, the other spouse 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 depend on whether or not you live in a community property state. In a community property state, the deduction is, generally, divided equally between you and your spouse. For more information refer to Publication 504 (PDF), Divorced or Separated Individuals; and Publication 555 (PDF), Community Property.

References:

• Publication 504 (PDF), Divorced or Separated Individuals
• Publication 555 (PDF), Community Property

If you have been impacted by a Presidentially declared disaster, the IRS may help you by allowing additional time for filing returns and making payments, and waiving penalties, in some circumstances, if the disaster has caused you to file or pay late. The IRS may also, provide copies or transcripts of previously filed returns, free of charge. You may be eligible to file for a casualty loss deduction on the prior year's tax return, or by amended return (Form 1040X) if you have already filed. For additional information on this subject, refer to Tax Topic 515, Casualty, Disaster, and Theft Losses, and Publication 547 (PDF), Casualties, Disasters, and Theft.

References:

• Publication 547 (PDF), Casualties, Disasters, and Thefts
• Tax Topic 515, Casualty, Disaster, and Theft Losses

You can include in medical expenses amounts you pay for a program to stop smoking. Unreimbursed amounts you pay for participation in a smoking cessation program and for prescribed drugs designed to alleviate nicotine withdrawal are expenses for medical care that are deductible subject to the 7.5% of adjusted gross income limitation if you itemize deductions on Form 1040, Schedule A (PDF), Itemized Deductions. However, you cannot include in medical expenses amounts you pay for drugs that are designed to help stop smoking that do not require a prescription, such as nicotine gum or patches.

For more information, see Publication 502 (PDF) , Medical and Dental Expensesor Revenue Ruling 99-28, which explains the deductibility or smoking-cessation programs. Revenue Ruling 99-28 is in Internal Revenue Bulletin 1999-25, dated June 21, 1999.

References:

• Publication 502 (PDF) , Medical and Dental Expenses

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