What Can I Deduct On My Taxes For Maximum Benefit?
During the last 20 years as a tax accountant I have been asked many questions but the most common is what can I deduct on my taxes? The answer I give to this question greatly depends on what I know about the particular needs of my client. Are they self employed? Are they asking on behalf of their corporation? Contained in this article are several tax deductions that I feel best answers this question for the broadest audience.
Moving expenses can be deducted if you had to change your residence during the current tax year because of a change in employment. There are tests to meet but you are entitled to deduct transportation, storage of household goods, lodging, and expenses incurred while house hunting.
Are you self employed? If you have a full time job but are doing a business on the side then you are entitled to a whole host of deductions. Cell phone, computers and equipment, internet, licensing, wages, home office are just a few of items that are deductible. Expenses in this area should be reviewed with your tax adviser but start keeping track of them now.
Loans made to friends and family that will not be repaid can be deducted as a worthless debt. You need to take this deduction in a timely manner to ensure the deduction. My rule of thumb is if the borrower has failed to repay by the agreed upon day then take the deduction during the current tax year. If they repay you later then you will need to report it in the year you are repaid but if you wait too long the IRS will determine it was actually worthless in the year before you actually took the deduction and will disallow it. I know this sounds confusing so consult with your tax adviser and you may even need to educate them a little.
Did you know the miles driven for medical and charity are deductible? With the rising costs of gasoline you have to try to get relief from somewhere and Uncle Sam is as good a place as any. The amount you can deduct changes each year so consult your tax adviser but more importantly start keeping track now so you will be prepared at year end.
If a school teacher ever asks me what can I deduct on my taxes one of the first things I think of is the educator expenses on line 23 of the 1040(2009). This deduction is often missed so if you or someone you know is a school teacher this is a worthwhile item.
Deducting your dependent children is done by everyone but are you aware of the different credits available for these children. I know of the child credit you say but are you also aware of the additional child credit. If you have been preparing your own tax return it is possible you have been missing this one.
When clients give me their K-1s from an S-Corporation or Partnership I ask them what expenses they have. Most people do not consider themselves self employed in this situation but if they are actively participating then they are entitled to the same deductions as other self employed individuals. Be sure to make your tax preparer aware of this so they are able to maximize your benefit.
When you work for someone else you may be incurring expenses that are deductible if your employer is not reimbursing you. Unreimbursed employee expenses is the category these fall under. Consult your tax advisor to make sure you are taking full advantage of these deductions.
What can I deduct on my taxes has been asked by every taxpayer since 1913. If you have found the answer to this question in the foregoing paragraphs then I am glad. However, if not or you have other tax related questions please feel free to contact me. If you follow the links at the bottom of this page to my web site you will find my email address as well as a lot of other information. Feel free to email me and either I or a member of my staff will respond to your question.
Zach Allred is a tax preparer with 20 years experience. Visit Small Business Taxes to sign up for his Free Newsletter. Also visit Federal Tax Deductions to read other free articles.