Tax Deductions You Can Take

If you itemize, here are some of the tax deductions you can take for you and your dependents, provided your deductions are higher than the standard deduction for your filing status.

First, here are the standard deductions:

Single or married filing separately, your deduction is $5,350

Married filing jointly, your deduction is $10,700

Head of household, $7,850

The standard deductions are higher if you are blind or 65 and over.

Here are some of the tax deductions you can take:

Medical deductions: Some of the medical and dental expenses that you can deduct include doctor, hospital and lab fees, prescription medicines and insulin, medical and hospital insurance premiums, eyeglasses, eye surgery, special items such as artificial limbs, guide dogs, expenses for being an organ donor, stop smoking programs, treatment for drug and alcohol abuse, and transportation for medical care. Remember, you can only deduct medical expenses that are above 7.5% of your adjusted gross income(AGI) shown on line 38 of Form 1040.

Taxes: You can take a tax deduction for state and local income taxes, or state and local general sales taxes, but not both. Choose to deduct the one that gives you the best tax benefit. Real estate and personal property taxes are also deductible.

Mortgage interest: You can deduct your mortgage interest, and new for 2007, mortgage insurance premiums are also tax deductible. Certain points you paid can also be deducted.

Investment interest: If you borrow money to buy property you hold
for investment, the interest you pay is investment interest. You can deduct investment interest. However, you cannot deduct interest you incurred to produce tax-exempt income, nor can you deduct interest expenses on straddles. Investment interest does not include any qualified home mortgage interest or any interest taken into account in computing income or loss from a passive activity.

Charitable contributions: Contributions to qualified organizations include church, Red Cross, The United Way and other nonprofit organizations, Boy and Girl Scouts and other nonprofit educational organizations, and nonprofit medical organizations. The IRS requires that you have records documenting your contributions. The miles you drive for these purposes are also tax deductible at 14 cents a mile, or you can use actual expenses for gas and oil, and you can also deduct parking fees and tolls. If you contribute clothing or household items, they must be in good used condition or better.

Casualty and theft losses: If you suffer a loss to your home, household items or vehicle, these are tax deductible. You may not deduct casualty and theft losses covered by insurance unless you file a timely claim for reimbursement and you must reduce the loss by the amount of the reimbursement.

These are just some of the tax deductions you can take. For more detail, go to Itemized Deductions.

As always, it is vital you keep accurate records of your deductions. Keep them in a safe place with your copy of your return, and I suggest keeping them for at least 3 years, if not longer.

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