Print Article for : Most Overlooked Tax Deductions

Your Online Guide » Guide to Finance » IRS Tax Deduction

[M687]Most Overlooked Tax Deductions

by Eric Patrick, Eri

With April 15th looming in the near future, many taxpayers are hustling to give Uncle Sam a good reason not to take more of their hard earned pay. And while there are an assortment of arguments and deductions available to the creative taxpayer, an often overlooked one is the deduction for unreimbursed Casualties, Disasters, and Thefts.

Insurance doesn't cover everything all the time

Psst...come over here...a little closer...I want to tell you a secret. Despite your insurance agent's best efforts, not every claim you file is covered. "No %#@*" you say?!? "I pay all that money in insurance premiums and when (fill in the blank) happens, all I hear is "that's not covered" "Well, thanks for nothing!"

We're from the government and we're here to help

How many stories end with the IRS riding to the rescue? Well, none actually. However, the IRS can help ease the pain in the case of certain unreimbursed casualty losses. What is a casualty loss? A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Can you give me some examples? Damage to property due to floods, fires, earthquakes, car accidents, and tornados just to name a few. So what types of losses aren't deductible? Destruction done by a family pet, dropping and breaking fragile items, and anything you intentionally burn up or pay someone to destroy (NO KIDDING!!!) are all not deductible. What if my stuff was stolen? You're still in luck (sort of)! The IRS defines theft as the taking and removing of money or property with the intent to deprive the owner of it. The taking of property must be illegal under the law of the state where it occurred and it must have been done with criminal intent. Sounds great! Where do I sign up? Well, before you go getting all misty eyed over your new found affection for the IRS, let's take a deep breath. Like everything involving taxes, there are a few hoops you have to jump through. First of all, you have to itemize your deductions. If you fill out the 1040EZ, you're out of luck. The only way to claim these deductions is to file Form 4684 and attach it to schedule A on a regular 1040 form. Another thing to consider is that any reimbursement you receive from your insurance company is not deductible. In fact, IRS publication 547 states that if you expect to be reimbursed for part or all of your loss, you must subtract the expected reimbursement when you figure your loss. What if I decide to not file a claim with my insurance company and instead take a deduction on my taxes? Good idea but the IRS won't allow it. If your property is covered by insurance, you must file an insurance claim for reimbursement of your loss. Otherwise, you cannot deduct a loss as a casualty or theft. The only silver lining here is that if your insurance company reimbursed you minus a deductible, your insurance deductible is deductible from your taxes. Confused yet? Help me make sense of this? PLEASE! Unfortunately, things get more complicated. For the purposes of this article I will forgo explanations pertaining to the $100 Rule and the 10% Rule. Just suffice it to say that these are two more calculations that are required before you arrive at the amount of your deduction. Instead, let me show you an example which will hopefully bring this togehter for you:

In June you had a car accident and your car was totaled. You did not carry collision coverage on your car. You paid $18,500 for the car. At the time of the accident the car was worth $17,000. The market value of the car after the accident was $200. Your adjusted gross income for the year the casualty happened is $70,000. You figure your casualty loss deduction as follows:

1. Adjusted basis of car (cost in this example) $18,500
2. Value of car at time of accident $17,000
3. Value of car after the accident $200
4. Decrease in value (line 2 minus line 3) $16,800
5. Loss (smaller of line 1 or 4) $16,800
6. Subtract insurance $0
7. Loss after reimbursement $16,800
8. Subtract $100 $16,700
9. Subtract 10% of $70,000 AGI $7,000

10. TOTAL CASUALTY LOSS DEDUCTION $9,700

Although a $9,700 tax deduction may not be as desirable as a $17,000 check from your insurance company, in this case, it's better than nothing. So the next time you suffer a property loss that's not fully covered by insurance, you may still be elgible for some financial relief. And that could cause you to say something you've never said before "Thank you IRS!"

When an individual files their tax returns each year they are able to claim a number of tax deductions. Many times a tax deduction can reduce the amount of money that is owed to the Internal Revenue Service (IRS) or it can create a larger tax refund. The most commonly used tax deduction is the standard tax deduction; however, there are number of other tax deductions that many individuals fail to claim or even consider. Frequently overlooked tax deductions can prevent a taxpayer from getting additional money that they deserve.

Claiming a number of tax deductions often requires receipts or other documentation. For this reason there are many individuals who may be unable to claim some of these frequently overlooked tax deductions on this years tax return. To prevent yourself from losing even more money next year taxpayers are encouraged to spend the whole year preparing for tax season and tax deductions.
http://www.taxhelpdirectory.com/morehelp/taxplanning/

One of the most frequently overlooked tax deductions is that of medical expenses. To claim a medical expense deduction the medical expenses must be at least seven and half percent of a taxpayers income. While this may seem like a large amount of money there are some individuals who will definitely qualify for this tax deduction. Families with a large number of children often qualify for this deduction because the total cost of healthcare for multiple children is often high. Taxpayers who recently had a child or were diagnosed with a life threatening illness are likely to meet the deduction requirements due to do multiple checkups and hospital visits.

There are a number of taxpayers who carefully keep track of the amount of money or items that they donate to charities; however, the majority of taxpayers do not which makes charitable donations another frequently overlooked tax deduction. Individuals who donated money, clothing, or household items are able to claim a tax deduction as long as the charity is approved by the Internal Revenue Service (IRS). The majority of most well known charities are approved; however, individuals can obtain a full list by visiting the website of the Internal Revue Service (IRS) which can be found at http://www.irs.gov.

Unfortunately there are a number of taxpayers who will qualify for a natural disaster tax deduction. With the recently active 2005 hurricane season and the dreadful predictions of more to come it is likely that a large number of individuals will qualify for a natural disaster tax deduction. This deduction is used to make up for the amount of property damage that was not covered by homeowners insurance. To qualify for a natural disaster tax deduction the property loss must be at least ten percent of an taxpayers income. It is sad to say, but with the majority of tornadoes, hurricanes, and floods is it not uncommon for a home to be completely destroyed which would allow the tax deduction to be claimed.

With many businesses declaring bankruptcy or laying off their workers there is an increased number of individuals looking for a job. Another one of the most frequently overlooked tax deductions is that of expenses related to a job search. Many job seeker know how expensive looking for a new job can be. It is possible for job seekers to claim tax deductions on their phone expenses that are related to a job search. These phone expenses may include long distance telephone calls to set up an interview or even over the phone interviews. In addition to phone expenses job seekers can also claim the mileage of going to and from a job interview. Other job search deductions may include the cost of having a resume professionally prepared and the costs of mailing or faxing out that resume.

Additional frequently overlooked tax deductions include the amount of money spent on sales tax, tax preparation, gambling losses, property taxes, and more. The best way to become aware about the most frequently overlooked tax deductions is by using a tax software program to prepare your taxes or hiring the services of a professional tax preparer. These are great ways to become aware of commonly overlooked tax deductions and to determine if you qualify for them.

Article Source : Pg. 3

About Author

Both Eric Patrick & Gray Rollins are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Eric Patrick has sinced written about articles on various topics from Small Business, Legal Matters and Tax Deductions. Eric D. Patrick is an attorney and Chief Operating Officer of Consumers Insurance Agency Inc. in Camp Hill, PA. For more information please contact me at