Medical Expenses:
Effective for 2019, 2020, 2021, 2022 & 2023 the threshold for deducting medical expenses is 7.5% of AGI for all taxpayers. For these years, the 7.5% threshold applies for purposes of the AMT in addition to the regular tax.
Self-Employed Health Insurance deduction increases to 100% in Year 2003 and thereafter.
Medical expenses are deductible in the year paid, regardless of when the expenses were incurred and regardless of the taxpayer's accounting method. Medical expenses paid with a credit card are deductible when charged, not when the credit card company is paid.
Deductible medical expenses include expenses paid for the taxpayer's spouse and for any person who qualifies as the taxpayer's dependent (for claiming an exemption).
--Please see other article on this website for list of deductible and non-deductible medical expenses.
Taxes:
NEW LAW: Effective in 2018 through 2025, the new law limits deduction for taxes paid as an itemized deduction -- up to $10,000 ($5,000 MFS)
State and local income taxes are deductible in the year paid. The tax may be paid through withholding, estimated tax payments or for prior year returns. Penalties and interest are not deductible.
The election to deduct Sales Tax is allowed for 2023, it can be computed either by actual sales tax paid or from an IRS table which bases the deduction on income amount.
Real estate taxes are deductible in the year paid for all property owned by the taxpayer. Real estate taxes for a property sold during the year must be allocated between the buyer and seller according to the number of days owned by each, both are considered to have paid their own share even if one or the other paid the entire amount. Special case: Equitable owner: Taxpayers who do not have legal title to a property may still claim a deduction for real estate taxes paid if they are equitable owners of the property. An equitable owner of a property is a person who has the economic benefits and burdens of ownership, based on facts. Occupying and maintaining the home and paying the mortgage and taxes on it are factors that might indicate equitable ownership.
The new law no longer allows an itemized deduction for foreign real property taxes.
Special assessments charged for local benefits or improvements that tend to increase a taxpayer's property value are not deductible.
Non-deductible Taxes include:
Custom or import duties; Federal Estate and Gift Taxes; Federal Income & Excise Taxes; Fine or Penalties for violation of the law, such as parking or speeding tickets; License fees such as marriage, drivers, dogs, trailers, boats; and Social Security, Medicare, railroad retirement taxes.
Personal Interest Expenses:
Not deductible (e.g., credit card Interest, car loan); interest paid on a taxpayer's Form 1040 tax deficiency; Interest on home equity debt > $100K; interest paid on life insurance loans; Home acquisition interest on loans not secured by residence; Bank overdraft fees.
Home Mortgage Interest:
Effective for 2023, a taxpayer may treat no more than $750,000 as acquisition indebtedness ($375,000 MFS). If a taxpayer has entered into a binding written contract before 12/15/17, to close on the purchase of a principal residence before 1/1/18, and actually purchases the residence before 4/1/18, the taxpayer is considered to have incurred acquisition indebtedness prior to 12/15/17. In this case, the limitation is $1,000,000 of acquisition indebtedness.
Interest on Home Equity Loans:
Taxpayers can often still deduct interest on a home equity loan, home equity line of credit (HELOC) or second mortgage, regardless of how the loan is labeled. The TCJA suspends from 2018 until 2026 the deduction for interest paid on home equity loans and lines of credit, unless they are used to buy, build or substantially improve the taxpayer's home that secures the loan.
Casualty and Theft Losses:
Effective for 2023, a personal casualty loss is deductible (subject to limitations), only if such loss is attributable to a disaster declared by the President (a federally-declared disaster area)
Charitable Contributions: Up to 100% of AGI depending on type of gift and recipient
-NOTE: List not All-Inclusive
Includes money or property given to:
-churches, synagogues, temples, mosques and other religious organizations
-Federal, state & local governments, if contribution is solely for public purposes
-Nonprofit schools, hospitals and volunteer fire companies
-Public parks and recreation facilities
-Public charities such as Salvation Army, Red Cross, CARE, Goodwill Industries, United Way, Boy/Girl Scouts, Boys/Girls Clubs of America, etc.
-War Veterans' groups
Charitable travel. Travel expenses such as transportation, meals and lodging are deductible if there is not a significant element of personal pleasure, recreation or vacation in the travel. Because charitable travel expenses are not business-related, they are not subject to business expense limitations. Car expenses can be deducted using actual cost or a standard mileage rate of 14 cents per mile.
Volunteer out-of-pocket expenses when serving a qualified organization. For example, scout leaders can deduct the cost of uniforms (and cleaning) that are worn when performing donated services, but that are not suitable for everyday wear.
Delegate to a church convention. Deduct the unreimbursed expenses of attending. A person must be a delegate and not merely attending on his/her own.
NON-DEDUCTIBLE Contributions:
-Civic leagues, social and sports clubs, labor unions and chambers of commerce
-Foreign organizations
-Groups that are run for personal profit
-Groups whose purpose is to lobby for law changes
-Homeowners' associations
-Individuals
-Political groups or candidates for public office
-Cost of raffle, bingo or lottery tickets
-Dues, fees or bills paid to country clubs, lodges, fraternal orders or similar groups
-Tuition (secular or religious)
-Value of blood given to a blood bank
-Value of time or services rendered by the taxpayer
-Rental value of a timeshare donated to charity, such as the right to stay at it for one week. The ownership interest in the timeshare must be donated to charity to make the contribution deductible.
Miscellaneous Deductions:
NEW LAW: Effective in 2018, the law repeals the deduction for all of the miscellaneous itemized deductions that were subject to the 2% AGI limitation under prior law
Previously Deductible Items (not all-inclusive) <-- not deductible in 2019, 2020, 2021, 2022 or 2023
-Appraisal Fees (for charitable donation or casualty losses)
-Clerical help and office rent for maintaining investments
-Credit card convenience fee for paying income tax by credit or debit card
-Employee business expenses, including travel, 50% of meals and entertainment, supplies, small tools, professional books and journals, home office deductions, and depreciation on property used for business such as equipment and vehicles.
-Fees to collect interest or dividends
-Hobby Expenses, up to the amount of hobby income
-Investment expenses
-IRA, SEP, SIMPLE or Self-Employment qualified plan custodial fees paid with funds outside the account
-Job-hunting expenses
-Job-related education expenses
-Legal fees for collecting or producing taxable income, keeping a job or obtaining tax advice
-Loss on deposits in an insolvent or bankrupt financial institution
-Losses on IRA investments when all amounts in IRAs have been distributed and total distributions are less than unrecovered basis
-Medical examinations required by employer
-Professional and union dues
-Research expenses of a college professor
-Safe deposit box fees or cost of installing a safe in a home
-Tax Preparation or other tax assistance expenses
-Trust Administration Fees
-Undeveloped land management expenses
-Union Dues
-Work clothes and uniforms if required and not suitable for street wear
Fully Deductible (not subject to 2% limitation)
-Casualty and theft losses from income-producing property
-Gambling losses, up to the amount of gambling winnings
-Special job-related expenses of the handicapped (readers and aides)
NON-Deductible Expenses:
-Club Dues
-Commuting Expenses
-Credit card fees, including fees incurred to pay income taxes
-Expenses to produce tax-exempt income
-Funeral Expenses
-Gambling losses in excess of gambling winnings
-Hobby expenses in excess of hobby income
-Homeowners' Association assessments (except as business expense, such as for a home office or rental property)
-House repairs and improvements on personal residence
-Legal fees for divorce (other than for tax work and to collect taxable alimony)
-Licenses and fees (marriage license, dog or cat license, driver's license etc)
-Life Insurance
-Loss from sale of personal residence
-Parking tickets and other fines for illegal acts
-Personal living expenses
-Political contributions
-Telephone expenses of first line for basic local residential service (even if a portion of the use is for business)