Overlooked & Unknown Tax Deductions

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The Internal Revenue Service (IRS) provides an array of tax deductions covering a wide range of personal costs incurred by taxpayers. Frequently used deductions such as real estate taxes and mortgage interest are well known to most taxpayers. However, before filing a tax return, you should become familiar with the requirements of infrequently used deductions to reduce your taxes.

Moving Expenses

  • The expenses incurred to move to a new area can be tax deductible if related to the start of a new job. Eligibility for the deduction requires that the new home be 50 miles farther from the former home than the previous job was from that home. The tax law requires that the taxpayer be employed full time for a minimum of 39 weeks within the first 12 months of arrival at the new location. This requirement can be satisfied by work obtained before or after the move. Deductible expenses include the cost of transporting personal property to the new location plus expenses incurred to travel to the new location.

Loan Default

  • If you make a personal loan and the debtor defaults, you are entitled to a tax deduction equal to the unpaid amount. The deduction is not available until the debt is deemed worthless. A determination of worthlessness occurs at any time the taxpayer is unable to recover the principal amount. The deduction is also available if you co-signed a loan, the principal debtor defaults, and you are required to make the remaining payments. Both types of losses are characterized as capital losses. Capital losses can be used to offset an unlimited amount of capital gains plus $3,000 per year. If the loss cannot be completely deducted in the year incurred, remaining amounts are carried forward to future tax years.

Job Search

  • Taxpayers who pay money out of pocket while searching for employment are eligible for a tax deduction if seeking a job in the same profession or industry. The deduction is disallowed if a substantial amount of time has passed between the loss of the former job and beginning to search for a new one or if this is the first time you are seeking work. Expenses eligible for the deduction include employment agency fees, resume preparation and mailing fees and the cost of travel to interviews.

Uniforms

  • The cost to purchase and maintain a work uniform is tax deductible if you are required to wear it as a condition of employment and the uniform is not suitable for wear outside of work. Common examples include protective gear, military uniforms and nurse’s scrubs.

Gambling Losses

  • The IRS requires taxpayers to include in gross income the total amount of gambling winnings. However, a deduction is also allowed for total gambling losses sustained during the year up to the amount of reported winnings. You are required to keep records of all gambling activities such as the date, amount of wagers, establishment where wagers are made and the amounts won and lost.

References

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