MEDICAL AND DENTAL EXPENSES

Deductible expenses include:

• Prescription medicines and drugs (including insulin)
• Medical, dental, and nursing care, including amounts paid for unreimbursed qualified long-term care services
• Medical and hospital insurance premiums, including amounts paid for eligible long-term care (subject to certain limitations based on the insured person’s age)
• Prescription eyeglasses, hearing aids, crutches, wheelchairs, and guide dogs
• Certain home improvements made for medical purposes or to make the home suitable for a disabled person

Nondeductible expenses include:

• Life insurance policy premiums
• Nursing care for a healthy baby
• Nonprescription drugs of medicines
• Weight-loss programs (unless recommended by doctor)
• Funeral, burial, or cremation costs
• Unnecessary cosmetic surgery (surgery that does not correct congenital abnormality or an abnormality caused by injury or disease)

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TAXES

Deductible Taxes:

• State, Local and Foreign Income Taxes – those taxes include tax withheld, estimated payments and tax paid for an earlier year
• Real Estate Taxes – State, Local or Foreign taxes on real property, such as the taxpayer’s house or land, are deductible.  Real estate taxes are deductible when paid.  If taxes are paid with a mortgage payment and held in escrow, do not deduct the taxes until they are paid back by the bank or the mortgage lender.
• Personal Property – Tax-Taxes that state and local governments charge on the value of personal property is deductible.  A portion of the cost of personal vehicle registration may fall in this category

Nondeductible Taxes:

• Federal taxes – income tax, social security (FICA), Medicare, railroad retirement tax, and excise taxes or customs duties
• Water and sewer taxes
• State, local and federal taxes on gasoline, diesel, and other motor fuels used in a non-business vehicle.
• Utility taxes – gas, electricity, etc.

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INTEREST

Home Mortgage Interest

A taxpayer can fully deduct points in the year he or she pays them only if all of the following conditions apply:

• The taxpayer itemizes deductions
• The loan is used to buy or improve a main home (a main home is the one the taxpayer lives in most of the time)
• The loan is secured by that main home
• The loan meets the requirements for deductible mortgage interest, discussed earlier under Home Mortgage Interest
• Paying points is an established business practice in the area where the loan was made

Non-deductible Interest:

• Loan fees; aid for services necessary to get a loan (closing cost, down payment)

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CONTRIBUTIONS

Qualifying Organizations:

• Churches, synagogues, temples, mosques, Salvation Army, Red Cross, CARE, United Way, Boy & Girl Scouts, World Wildlife Fund, etc.
• Nonprofit schools and hospitals

Nonqualifying Organizations:

• Business organizations, such as the Chamber of Commerce
• Political organizations and candidates
• Homeowner’s associations

Deductible Items:

• Money gifts
• Dues, fees, and assessments paid to qualified organizations above the value of the benefits received (not country clubs or other social organizations)
• Fair market value of used clothing, furniture, etc.

Nondeductible Items:

• Cost of raffle, bingo, or lottery tickets
• Blood donated to a blood bank or the Red Cross
• Direct contributions to an individual

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MISCELLANEOUS ITEMIZED DEDUCTIONS

Deductible Items:

• Union dues and fees
• Uniforms not adaptable to general use
• Professional books, magazines, journals, etc.
• Employment-related educational expenses
• Expenses of looking for a new job
• Investments counsel fees
• Tax counsel and assistance
• Safe deposit box rental for investment documents
• Acupuncture
• Insulin
• Air conditioner for allergies
• Nursing fees
• Contacts, including supplies
• Chiropractic services
• Cosmetic surgery for deformity relating to a congenital abnormality, accident, or disease
• Birth control prescribed by a doctor
• Investment interest
• Casualty losses
• Theft losses
• Work clothes not suitable for normal wear
• Occupational licensing fees
• Travel expenses relating to managing investments
• IRA administration fees
• Fees to collect interest or dividends
• Trust administration fees
• Impairment related work expenses

Nondeductible Items:

• Burial or funeral expenses
• Wedding expenses
• Home repairs, insurance and rent
• Insurance premiums (except medical insurance premiums)
• Losses from the sale of a taxpayer’s home, furniture, personal care, etc.
• Personal legal expenses
• Commuting expenses to and from work

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