Saturday, October 6, 2012

Commonly Missed Federal Income Tax Deductions

Following are some of the most commonly missed deductions on federal income tax returns.

Charitable Contributions of Physical Items

Contributions given to a charitable organization are a common deduction on federal income tax returns. Many people know they can deduct the amount of any cash contributions made to such organizations. But they overlook deducting the value of other types of contributions to charitable organizations.

If you have donated clothing, furniture, baby toys, or any other item that is in good working condition, you can deduct the fair market value of that item on your federal income tax return.

Are you unsure how much an item you want to donate is worth? If so, some organizations publish guidelines to help you determine the fair market value.

Certain Costs Related to Refinancing

With many homeowners seeing the lowest mortgage interest rates they have seen in their lifetime, there has been an abundance of refinancing of homes. Some homeowners have been able to take advantage of the low interest rates to refinance their homes multiple times.

If you paid points related to your refinancing, you can deduct a portion of those points on your federal income tax return. You can calculate the amount of your deduction by dividing the number of months of your loan in the current year by the total number of months of your loan term, and then multiple that fraction by the amount you paid in points.

In addition, if you refinance and have points from a previous mortgage that you have not finished deducting, you can deduct the full amount of the remaining point cost.

Expenses as a Teacher

If you are a teacher of grades kindergarten through 12, or an office aide or principal in an elementary, middle, or high school, you can deduct up to $250 in expenses on suppliers you use for teaching that are not paid for by the school.

Energy Efficiency Upgrades to Your Home

The federal government has generally been supportive of providing an incentive for homeowners to improve the energy efficiency of their homes. Therefore, they offer federal income tax deductions on various energy efficiency improvements. These deductions can include a portion of expenses for insulation, high-seer air conditioning and heating equipment, solar panels, and energy efficient windows.

Casualty Losses

If your home was damaged due to any act of nature, including but not limited to tornadoes, hurricanes, floods, and forest fires, where the area was declared a federal disaster area, then your losses from the disasters can be deducted on your federal income tax.