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List of 15 Commonly Overlooked Personal Tax Deductions for Individuals

By Kira Botkin

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The only thing worse than paying taxes is inadvertently paying more than you have to. You can avoid this by taking advantage of the common and commonly overlooked deductions. It’s best to be aware of these all year long, so you can maximize your deductions and maintain good records.

Even if the tax filing deadline is rapidly approaching, it still pays to know which deductions you could be eligible for so you can dig up old receipts to claim them. See if you can reduce your taxes or increase your refund by claiming any of the following.

Overlooked Tax Deductions

1. Tax Preparation Fees, Schedule A, Line 22
You can actually deduct the cost of tax preparation on your Schedule A. If you paid taxes and used a credit or debit card to do so, you can also deduct convenience fees. This deduction doesn’t apply if you used a free online tax preparation software or service, but you can write off paid services, such as TurboTax, H&R Block, or TaxACT. Just keep in mind this only applies to fees you paid in the year you’re deducting them. For instance, when filing taxes for 2013, you can only deduct fees paid in 2013 for your 2012 tax return.

2. Hobby Expenses, Schedule A, Line 28
Hobby expenses can be claimed as “other miscellaneous deductions.” While your hobby may not actually qualify you for small business tax deductions, you can deduct some of its expenses. However, you can only deduct as much as you generated in income from your hobby For instance, if your homegrown orchids netted you $300, but cost you $1,000, you can only deduct $300 in expenses. This helps recoup some money if you have a small business that has gone three years without a profit – at which point the IRS categorizes your operation as a hobby.

3. Personal Legal Bills, Schedule A, Line 28
Personal legal bills also fall into the “other miscellaneous deductions” category. You can deduct your legal fees as long as the lawyer is pursuing taxable income on your behalf, or is working on a determination, collection, or refund of any tax. For example, if you’re going through a divorce and pay $1,000 to a lawyer who is working to secure alimony for you, you may deduct the $1,000. However, hiring a lawyer to gain custody of a child is not deductible.

You may also deduct legal expenses incurred while doing or working to keep your job. For instance, if you’re in a legal dispute with your company over unlawful termination, you could deduct the expenses as long as you’ve paid the fees you’re deducting and you’re deducting them in the year you paid them.

Legal deductions are limited to two percent of your Adjusted Gross Income (AGI). For instance, if your adjusted gross income is $40,000, your deduction would be limited to $800 – two percent of $40,000.

4. Educator Expenses, Form 1040, Line 23
If you worked as an eligible educator in a K-12 school as a teacher, aide, counselor, or administrator, and you personally purchased ordinary and necessary back-to-school supplies for the classroom, you can deduct up to $250 worth of these expenses on your 1040 form. If you spent more than $250, you can deduct the remainder on Schedule A.

If you’re married and filing jointly, and your spouse is also an eligible educator, you can deduct up to $500 total in educator expenses, but neither you nor your spouse may deduct more than your individual $250 limit.

5. Charitable Mileage, Schedule A, Line 16
While it’s widely known that cash or goods donated to charities are tax-deductible, you may not realize that mileage driven as a volunteer is also deductible. If you drive to your volunteer location or run any errands while volunteering, keep a log of your miles. You can deduct 14 cents per mile plus parking and toll fees.  You can also deduct the fees you pay to use public transportation to go to and from the volunteer location.

6. Contributions to Fraternal Lodge Societies, Schedule A, Line 16
These are also considered charitable donations – to a point. Dues that are specifically required of members are not deductible, but donations in excess of the required amount which are used for qualified charitable purposes (such as the Shriners hospital funds, or donating to local charities) are considered charitable donations. You can claim an amount up to a maximum of 30% of your adjusted gross income (AGI).

7. Losses Due to Theft or Destruction, Schedule A, line 20
If your car was hit by hailstones or you lost siding in a natural disaster, you can deduct the amount of the loss that you weren’t reimbursed by your car or homeowners’ insurance company. You must complete Form 4684 to determine the amount you can deduct.

1040

8. Retirement Savings Contribution Credit, Form 1040, Line 50
If you contributed to your 401k, another retirement plan through work, or a traditional or Roth IRA, you may be eligible for the saver’s credit. The maximum credit for individual filers is $1,000 if you contribute at least $2,000 to a qualified retirement account. Those who are married filing jointly may receive up to $2,000 in credit.

However, you must meet the income requirement for your filing status in order to qualify, and the lower your income, the greater the credit you can receive – an amount ranging from 10% to 50%. For 2013, the income limits are $29,500, $44,250, and $59,000 if you file as single, head of household, or married filing jointly, respectively. Use Form 8880 to determine your total credit and credit rate.

9. Education Credits, Form 1040, Line 49
Did you take a knitting class or pick up sign language or another life skill at your local community college this year? What about the continuing education classes you took for your job? Any expenses incurred may qualify for the Lifetime Learning Credit, which can net you up to $2,000 in tax credits. You can get this credit for classes taken by your spouse or any dependent as well, as long as you aren’t part of an employer tuition reimbursement program. The more well-known American Opportunity credit allows you to deduct up to $2,500 in expenses for undergraduate students, including you or your spouse. It is also a refundable credit – unlike the Lifetime Learning credit. In other words, you can get a portion of it refunded to you, even if you have no tax liability. If you claim either credit, you cannot also claim the tuition and fees deduction on your 1040.

10. Property Taxes on a Timeshare, Schedule A, Line 6
Frequently, your portion of the property taxes paid on a timeshare are included in your yearly maintenance fee. Check the statement to see if they are separated out. Additionally, if you sold a home or timeshare this year, any property taxes you already paid should be on your settlement statement and can be deducted as well.

11. Last Year’s State Income Taxes, Schedule A, Line 5a
If you owed any state tax from 2012 and paid it in 2013, be sure to deduct it on your Schedule A, as it’s now a deduction for 2013.

You may also elect to deduct state and local sales taxes instead of state income taxes. These are entered on Schedule A, Line 5b. You may use your actual expenses, or the state and local sales tax tables located in the Instructions for Schedule A to determine your deduction. Your deduction is based on the state where you live, your AGI plus any nontaxable items, and the number of exemptions claimed on your tax form.

12. Penalty on Early Withdrawal of Savings, Form 1040, Line 30
Did you cash in a certificate of deposit early this year? If you were charged a fee for doing so, you can deduct the penalty on your 1040 as part of your AGI.

13. Medicare B and D Premiums, Schedule A, Line 1
Medicare B and D premiums (which you sign up for voluntarily) can be deducted as a medical expense. Also, if you aren’t eligible for Social Security and you voluntarily enroll in Medicare A, you can deduct your Medicare A premiums.

Beginning January 1, 2013, you can only deduct the part of your medical or dental expenses that exceeds 10% of your AGI.

14. Breastfeeding Equipment and Pumps, Schedule A, Line 1
An IRS ruling has declared breast pumps and other breastfeeding equipment to be medical equipment, which means its cost can be deducted on Schedule A. Since these pumps are often expensive, adding their cost to your other medical expenses can help you achieve the required total before deductions are meted out (10% of AGI).

15. Financial Planning and Management Expenses, Schedule A, Line 23
If you subscribed to an investment newsletter, paid a financial advisor to review your retirement plan, had an attorney prepare a living will or trust, or otherwise spent money to manage your money, you can deduct these expenses.

Final Word

While it may seem cumbersome to keep track of all these little deductions, they can add up to big savings on your taxes or help maximize your refund. To make filing your taxes easier, create a dedicated set of files on- or offline to record your expenses as you incur them year-long. And if you receive a refund, use it wisely – consider applying it to your emergency fund, credit card debt, or padding your retirement savings account.

Which of these are you utilizing and taking advantage of?

(photo credit: Shutterstock)

Kira Botkin
Kira is a longtime blogger and serial entrepreneur who enjoys gardening, garage sales, and finding stray animals. She lives in Columbus, Ohio, where football is a distinct season, and by day runs a research study for people with multiple sclerosis. She hopes that the MoneyCrashers team can help you achieve your goals and live a great life.

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  • http://www.checkadvantage.com/ Kasey

    Great tips Kira!
    I was wondering if you really could deduct the cost of TurboTax since you’d think the software would let you know that fact when you get to that step.

    Speaking of deductions for breast pumps…did you know you if you’re a stripper you can deduct the cost of a boob job? Strange but true!

    • Kira Botkin

      Well, you need to be able to itemize your deductions in order to get a benefit from that, so it might not come up for many people, but you are able to deduct the cost of the software. I would guess however that the software doesn’t know how much you paid for it!

      As far as boob jobs – I wonder if you have to deduct it in the same way as any other business expense that you also use outside of work, like a car. What percentage of the time was your boob job in use for business purposes vs personal… =)

      • http://blog.checkadvantage.com/ Kasey

        Excellent points!

        Re: TurboTax – I did itemize and it asked me about tax preparation fees – but I guess the software has no idea what level I’ll end up buying in the end.

        Re: Boob jobs – Yes,it would be a shame not be able to take advantage of personal use. :)

  • Steve

    You neglected to mention that there is a threshhold for medical and miscelaneous deductions which most people never meet, which generally renders # 1,2,3,7,11,12,13, and 14 moot

    • Kira Botkin

      It is true that there is a threshold, but the more items you add in, the closer you get to meeting that threshold.

  • John Thompson

    For Tip #14 I think you mean Schedule A Line 23 not 22.

    • Kira Botkin

      Yes, sorry it is indeed line 23. Thanks for catching that!

  • Charlene

    Hi Kira,

    To be able to qualify for the deduction for Medical Expenses wouldn’t you have had to be quite an unlucky sap last year? To have more than $3000 in Medical expenses with an adjusted gross income of just $40,000 had to be a great pity, and not a situation to rejoice over, or be envied, at all. Am I figuring that correctly or am I missing something. I would prefer to be in good health than look forward to this tax deduction.

    Thanks for your helpful tips.

    • Kira Botkin

      Yes, it’s pretty much for catastrophic cases. That is why some people who might qualify will file as married filing separately, so that if the spouse with the medical issues had the lower income (which is likely) they’ll get to take the deduction. It’s not intended to be a deduction everyone takes. However, including everything that counts as a medical expense (like breastfeeding supplies) can help get you over that 7.5% line and then you can deduct the lot of it. Hopefully few of us will be taking this deduction this year, though!

  • Gwen Thomas

    Found one that I did not know about. Thanks!

  • Karen A ureli

    If you are paying medical bills for someone in your family that was without a job, can you add that to your medical bills for a reduction?

  • Kira Botkin

    You can deduct medical bills for someone else if they are a relative who lived with you all year and you paid for at least half of their living expenses. They don’t have to have income under a certain amount as long as you paid at least half of their other expenses other than medical. But if they didn’t live with you or they paid their own way most of the time except this one instance, you can’t deduct it.

  • Andri

    Hi. I went through a divorce last year (initiated in Aug, 2009). I hired my attorney in Feb 2010 and paid a total of $10,750 (so far). Much of what we worked with was pension, support, division of estate, etc.
    Is this entire $10,750 a deduction?
    Thank you for the list! It’s very helpful!

  • Kira Botkin

    As far as obtaining support, that would definitely be deductible. You might want to see if your attorney can give you any kind of breakdown as far as how much time he spent on the various monetary benefits he acquired for you. Pension, etc would depend on whether this was something you wouldn’t otherwise have gotten without legal help. Otherwise, I’d say the worst that can happen is that you get audited and have to pay some money back three years later.

  • Andri

    Thanks so much, Kira! My ex is a cop……sadly, not the ethical kind. He had hidden funds, lied about pension contributions, withheld child support and other admiral traits we look for in those entrusted with our safety/security! ;) Heh, I do believe kharma will catch up eventually! ;D

    I’ve got breakdowns of the charges. I’ll go through, but know I’ll need to add up quite a bit in order to exceed the standard deduction.

    I do volunteer work and kept track of mileage. I work from a home office and know I can only utilize the square footage of my office (not sure how to include electricity, internet, etc.).
    I make <$40k and have custody of our son. I suspect the ex will be sneaky again with the IRS and attempt to include some write offs there. So wish I could direct them his way! ;D

    Thanks again!

  • Kira Botkin

    It just so happens we also have an article about the home office deduction: http://www.moneycrashers.com/irs-home-office-tax-deduction-rules-calculator/

    However, the home office deduction isn’t part of your itemized deduction, you can take that if you are showing a profit on your work. And, if you can give any specifics, calling the IRS tip line at 1-800-829-0433 would be a good (anonymous) deed for the rest of us who do things honestly!

  • Andri

    Sorry for the delay. Thank you (again)! I’m now not so sure the home office would apply to my situation. I’ll do some research.
    Anonymous tip line….Sometimes, kharma needs a boost, eh?

  • R.L.

    Hi Kira,

    I am disabled and raising a 12 year old step daughter, my SS disability paper always says I can not file, but have been told different????? Can I file and use the child tax credit? I get just a few dollars over a whopping 12,000 a year, ( another one of them luxuries from being hit head on by a drunk)
    Thank you for your time!

    • Kira Botkin

      Do you mean can you file your taxes? You can always file taxes, but if you only get SSDI, you probably don’t have to because your income is low enough that you are unlikely to actually be paying taxes. The child tax credit is nonrefundable, which means it can only be used to pay down the taxes you owe – and since you probably don’t owe any, you wouldn’t see any benefit. But if you have any other tax credits or deductions you could claim, you might as well try. Call the IRS and ask for the nearest volunteer tax prep center – it’s free for low income filers.

  • Hmsbellerophon74

    Thank you, very valuable.

  • http://profile.yahoo.com/UBQMZH2R6YP624N7C4P55YTWCE J Edgar

    Good morning, Does this mean I can deduct the 1600 I paid for chapter 7 bankruptcy filling in 2011?

    • Kira Botkin

      You can only deduct legal fees if you paid them in order to get taxable income. So bankruptcy would not apply.

  • silverstreak

    My husband is disabled and I am not working and not receiving benefits of any kind other than $344 per mo. from Michigan Public Schools REtirement. Our total income is about $1900 per mo. We paid no taxes this year. We have $14,000 available to us this coming summer (without penalty). We want to get it out of Mutual Funds and put it someplace that’s secure but available to us if we should need it. We want it to earn interest but we really don’t want to declare it as income if we can keep from it. Can you advise us?

    • Kira Botkin

      Unfortunately this really isn’t my area of expertise, but in general, if you earn interest on something and you get that interest paid to you, it’s almost always going to be reportable as tax income. The best you could probably do is high dividend stocks that classify their dividends as long-term capital gains, so you would get the lower tax rate, but it sounds like you are not going to be happy if the stocks go down in value. But other than putting your money in shady offshore banks, interest is always income.

    • Kira Botkin

      Unfortunately this really isn’t my area of expertise, but in general, if you earn interest on something and you get that interest paid to you, it’s almost always going to be reportable as tax income. The best you could probably do is high dividend stocks that classify their dividends as long-term capital gains, so you would get the lower tax rate, but it sounds like you are not going to be happy if the stocks go down in value. But other than putting your money in shady offshore banks, interest is always income.

  • Sbenson6

    Someone else paid my medical insurance prmiems for 2011. I have heard that I can deduct these premiems as part of my medical expenses because they are considered as gifts to me. Is this true?

    • Kira Botkin

      Yes, that sounds logical. You can deduct medical premiums in a fashion and where the money came from to pay them should not be an issue. However, you aren’t directly deducting them – only the amount that’s above 7.5% of your AGI can be deducted, and then it must be part of an itemized deduction.

  • mom21

    Hi, I live in MO and have been told money spent on my daughter’s school supplies, clothes can be a tax write off. Is that correct?

    • Kira Botkin

      If they are specifically required by the school, yes. That would be things like uniforms, specific textbooks, or fees for participating in a certain class. But normal clothes that aren’t specifically for school or pencils, notebooks, backpacks, etc aren’t deductible.

  • fel

    can yearly rent be dediuucted?

    • Kira Botkin

      Yearly rent of what? If you mean your personal living space, no.

  • Karen

    Hello, I am a school teacher. I volunteer for a lot of the after school functions and I stay after hours to complete paper work. Can I write this off as volunteer time?

  • Brenda Lin

    Surprise no mention of life insurance is on this list.
    Remember – Life insurance premiums are NOT generally deductible on your individual income tax return. But, if u get the right policy, like the $30/month, $1 million benefit one from Life Ant (or some other similar site), the benefits paid to the beneficiaries will be tax free (as long as the policy is transferred before death, and not part of the estate).

    Life insurance FTW!

  • Derrek

    Do I need to keep receipts of EVERYTHING in order to be eligible for deductions?

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