10 Itemized Tax Deductions

When you file your federal annual income tax, you get a choice of taking the standard deduction, or itemizing deductions. The IRS lets you take the higher of the two. If you understand itemized deduction opportunities, and keep records throughout the year, you can best prepare to see if itemized tax deductions might be most beneficial for you.

As always, consult a tax advisor or the IRS if you are not sure if something is eligible as an itemized deduction.

1 Medical Expenses

Medical expenses need to represent a certain percentage of your adjusted gross income to qualify for this itemized deduction. Keep track of the following medical expenses during the year and keep detailed records. Save supporting documentation. The following items may qualify for deductions:

-- Any cost for doctor, dentist, or hospital visits that aren’t covered by your insurance or aren’t paid for with an employer’s pre-tax cafeteria plan or your pre-tax health savings account

-- Post-tax payments for health insurance premiums, or for long term care insurance premiums

-- Medical items you needed that were not covered by insurance: such as eye glasses, contacts, hearing aids, and prosthetics

-- The cost of smoking cessation programs or weight loss programs, in some cases

-- Other items that are medically related and may be deductible – such as the cost of a humidifier to aid in breathing, if a doctor recommended it.

2 Expenses Related to Refitting or Remodeling Your Home for Medical Reasons

In some cases, expenses for remodeling your home for medical reasons – to accommodate a disabled or chronically ill person – may qualify as itemized deductions. Expenses under this category could include the installation of ramps, railings, or other construction needed for medical purposes.

3 Taxes

Some taxes qualify for itemized deductions. These include:

-- Sales tax (state or local) you paid on personal property for the year

-- Taxes on licensing your automobiles

-- Real estate taxes

-- Property taxes

4 Interest

Mortgage interest is deductible, subject to certain limits. If you have a second mortgage for a second home, that interest may be deductible as well. Student loan interest may be deductible. For a first mortgage, points paid may be deductible. Mortgage insurance premiums (if qualified) may be eligible for deduction.

5 Donations

Deductions for donations are limited to a certain percentage of your adjusted gross income (AGI). Cash donations are deductible to qualified organizations. Keep records of donations. Non-cash donations (such as clothing donated to the Goodwill) are also deductible, if you get a receipt for your donation and keep track of what you gave away. There are limits to the amount you can deduct for donations.

6 Casualty Losses

You can deduct your losses due to a natural catastrophe like a hurricane or a fire. Theft and vandalism losses also qualify under this category. You may be able to deduct the cost of an auto accident, as long as it wasn’t due to driver negligence.

7 Gambling Losses

Gambling losses are deductible to the extent of gambling income earned.

8 Investment Interest

Investment interest is deductible up to the amount of investment income.

9 Travel Expenses for Medical or Dental Appointments, and for Volunteer Work

You can deduct the cost of travel to any medically related appointment. The IRS allows a special mileage rate for medical travel expense. Keep a mileage log throughout the year and note date, purpose of travel, and number of miles.