Miscellaneous Tax Deductions

Miscellaneous Deductions




To understand how to handle miscellaneous deductions on your taxes, it is necessary to understand what is meant by adjusted gross income. Adjusted gross income is the sum of all your sources of income such as wages, tips, royalties, and dividends MINUS contributions to IRAs or 401k’s, some business expenses, moving costs, alimony payments and other similar expenses.



Suppose your adjusted gross income is $50,000. In order to deduct miscellaneous expenses from your taxes, your total miscellaneous deductions must total over 2% of your adjusted gross income. In our example, 2% of $50,000 is $1,000. You can deduct any miscellaneous expenses that exceed $1,000. For example, suppose you have $1500 in allowable miscellaneous deductions. You may deduct $500 from your taxes.



Now that you know how miscellaneous deductions are computed, you need to know what kind of deductions qualify.



Miscellaneous expenses related to home and car ownership.



Everyone who owns a home realizes that mortgage interest and property tax are deductible. Also deductible are expenses related to selling your home like real estate commissions, closing costs, and other assorted fees. Also, the fee to register your car every year is deductible.



Charitable contributions: charitable contributions are deductible as are appraisal fees incurred when you donate big ticket items like cars and appliances. Travel expenses to the place a charitable activity is performed is also deductible.



Business travel is tax deductible. Also, if you have your business attire dry cleaned while you are on the road, this is deductible also. You may also deduct business expenses for the shipping of items you need while traveling such as documents and equipment. Additionally, if you need to stay in touch with the office or with clients while traveling, you may also deduct telephone and fax expenses. Union dues are also deductible.



A good strategy is to time your contributions to maximize deductions. For example, you can pay your favorite charity or religious institution in one lump sum before December 31 for the next year and deduct that whole amount on the current year’s taxes. Also, you can pay your child’s orthodontist off before the end of the year instead of making monthly payments stretched out over several years. Strategies like these will give you miscellaneous deductions that will exceed 2% of your adjusted gross income and will give you big tax savings.