Last week we went over the medical deductions portion of the Schedule A. If you missed it, check it out here to learn about the basics! Now we’ll dive into three more pieces of Schedule A and see more lions and tigers and bears … Oh wait, I mean “deductions”, you can take!
Taxes, Taxes, Taxes
Since you’re filing a tax return, it seems only fitting that you should be able to deduct taxes you have already paid throughout the year. If you own a home, you will most likely pay property taxes. You should keep track of these payments you make throughout the year, but if you don’t, you can go to your county treasurer’s website and look them up using your address and/or property owner’s name. You are also able to deduct taxes paid on personal property such as vehicles. You cannot deduct your entire car registration, but your registration bill should be broken down so you can tell which portion is taxes or fees.
You can also deduct state and local general sales taxes or state and local income taxes; you cannot deduct both. Some states, such as Nevada, do not have state income taxes, and therefore, residents of states like Nevada, would opt to take the general sales tax deduction. If you keep receipts for all your purchases throughout the year, you can add up all the sales tax on those and use that as your deduction. Most people do not do that because it is too cumbersome, not many people save receipts all year-long anymore. Therefore, people often use the general sales tax deduction that is calculated automatically. You can use the IRS worksheet on page A-5 of the Schedule A instruction to calculate your deduction or an easier route is to use the IRS sales tax calculator. If you make any large purchases throughout the year such as a car or household appliances, be sure to save those receipts because the sales tax you paid on that item will often be greater than the deduction you’d receive by using the calculated sales tax deduction.
If you have a home mortgage, you probably pay interest. If you do, you should receive a Form 1098 which reports the total amount of mortgage interest you paid during the year. It may also show the property taxes you paid so you do not have to look them up online. Your 1098 might also show any mortgage insurance premiums paid which are also deductible. If you refinanced your house during the year, be sure to hang on to your precious HUD statement. Your HUD statement will show “adjusted origination charges” paid when you refinanced your house. You can input these origination fees on your tax return and amortize them over the life of the loan; you can continue receiving deductions years after you refinance! Additionally, if you are involved in investing, you can deduct interest on money you borrowed to purchase investments. Be sure to check the IRS website for any special limitations that may apply to you regarding investment interest.
If you donate to charity, you are not only helping others around you, but if you are also adding more deductions to your tax return! In order for your donation to be deductible, the organization must be a qualified exempt organization. If you are not sure, the organization should be able to provide you with that information, or you can use the IRS search list to see if that organization qualifies.
You should keep track of all cash and non-cash donations made throughout the year. On your tax return, you should list out which organizations you donated cash to and how much. With regard to non-cash donations, you should keep track of where you donated items to, and the fair market value of those items. If you are not sure of the value of the items you donated, Goodwill offers a good list of the value of donation items. See that list here if you are not sure how much of a deduction you should take. If your non-cash donations are $500 or greater, you will be required to list the organization, a list of items donated, and the fair market value. If your non-cash donations are less than $500, you only need the organization name and the fair market value of the items.
Be sure to continue tuning into The Tax Bleep so we can wrap up the Schedule A together!
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