Tax preparation is often a confusing and frustrating task. Every year, people pay more taxes than necessary because they are unaware of tax deductions they are eligible to take. Aside from business expenses, the main deductions available to individual taxpayers are listed on Internal Revenue Service (IRS) Form 1040 and Schedule A.
Form 1040 Deductions
The first page of Form 1040 lists several deductions that reduce your gross income. Gross income is your income from all sources less any business losses. If applicable, the following deductions are listed on the first page of the Form 1040 for 2012: educator expenses, expenses related to Form 2106, health savings account, moving expenses, one-half of self-employment tax, self-employed SEP, SIMPLE and qualified plans, self-employed health insurance, penalty on early withdrawal of savings, alimony, IRA deduction, student loan interest, tuition and fees and domestic production activities. There are specific qualifications for taking each of the Form 1040 deductions. Read the requirements thoroughly and complete any necessary supporting IRS forms.
Medical and Dental Expenses
You can deduct medical and dental expenses to the extent that they exceed 7.5 percent of your adjusted gross income. Your adjusted gross income is the total of your income less business losses and any itemized deductions listed on the first page of Form 1040. The medical and dental expense deduction is listed on Schedule A. Schedule A deductions need to total more than your standard allowable deduction to be of any use. Generally, the standard allowable deduction for the 2012 tax year is $5,950 if you are single, $11,900 if you are married filing jointly or are a qualified widower, $8,700 if you are filing head of household. Certain conditions apply, however, so use IRS Publication 501 to determine your standard deduction and whether it would be beneficial to take the standard deduction or to itemize your deductions.
Taxes and Interest
Also on 2012's Schedule A, you can deduct taxes you’ve paid for the following items: state and local income tax or state and local general sales tax (you can't claim both), real estate taxes, new motor vehicle taxes, personal property taxes and foreign country or U.S. possession income taxes. Home mortgage interest, points paid on mortgage financing and qualified mortgage insurance premiums are also deductible.
Charity and Casualty and Theft Losses
You can deduct donations of cash or property made to any qualifying charity on Schedule A. Form 8283 is required if your charitable donations exceed $500, and charitable gifts of property over $5,000 require a professional appraisal. Read the instructions carefully to determine if you need to complete the additional forms. If you suffered a casualty loss or a loss due to theft, you may deduct the loss on Schedule A. Form 4684 is also required for a casualty or theft loss.
Miscellaneous Schedule A Deductions
Some of the miscellaneous deductions included on Schedule A are: unreimbursed employee expenses, tax preparation fees, safe deposit box expense, money you spent to produce or maintain taxable income and to manage or protect property held for earning income. Some of the miscellaneous deductions have additional rules and requirements, or require the preparation of additional supporting forms.