Friday, April 2, 2010

2009 Tax Deductions That You Should Not Overlook

With 13 days to go before April 15th here is a list of tax deductions many people either miss or forget.

Charitable Contributions: If you itemize your deductions and gave money to a church, a charitable organization such as the Red Cross, or a nonprofit organization such as the Boys and Girls Club of America then you are entitled to deduct your contribution. You must make sure you get a written receipt for your deduction just in case you get audited. If you donated your old clothes, furniture, books, etc to your local Goodwill, Big Brother or Salvation Army, you are entitled to deduct the value of your contribution. In addition, if you donated money to support disaster relief in Haiti after January 11, 2010 and before March 1, 2010 these contributions also qualify to be deducted on your 2009 return. So, if you didn't have the cash to contribute in 2009, I hope you charged it.

Points: If you were able to refinance your home in these tough economic times, any points you paid to refinance your home can be deducted on a monthly basis over the life of the new loan. All unamortized points on an old refinancing are deducted in the year of a new refinancing.

Health Insurance Premiums: Any health insurance premiums you pay, including some long-term-care premiums based on your age, are potentially deductible. But you have to add these to your medical expense pot. Medical expenses have to exceed 7.5% of your adjusted gross income (AGI) before they give you any tax benefit. If you're self-employed and not covered by any other employer-paid plan, though, you can deduct 100% your health insurance premiums (to the extent of your net income) "above the line." Above the line means the expense is an adjustment to your adjusted gross income.

Educator Expenses: If you're a kindergarten through grade 12 teacher, teachers aide, instructor or principal, you can get an above-the-line deduction for as much as $250 for materials you bought in 2009. That includes books, supplies and even computer equipment.

College Education Expenses: In this category you will have a choice of taking either an adjustment to income or a tax credit. A tax credit will reduce your taxes payable on a dollar for dollar scale while the adjustment to income can either reduce or increase your gross income. If your adjusted income is less than $65,000 for single taxpayers or less than $130,000 for married filing jointly taxpayers you can deduct up to $4,000 on your adjusted gross income. If you qualify, you can take either the Lifetime Earning Credit which is worth $2,000 or the American Opportunity Credit which is worth $2,500. Since you have choice between the tax credit and the adjustment to income, you will have to choose which one offers the greater tax benefit.