With federal and state tax returns due on April 15, advice on reducing your tax bill pops up in many forms and forums. Advice runs from the serious to the sublime. Rucci Law Group recommends that you take a few moments to think through the legal implications of your tax position.
One little known tax intricacy relates to deducting points paid on a mortgage during refinancing. When you purchase a residence, you are allowed to deduct all the points paid to get your mortgage. If you refinance, the deduction isn’t quite so generous up front. You have to deduct the points over the life of the loan, generally 1/30th per year. That adds up to $33 per $1000 of points paid. Even though it is rather dull the money adds up and it is worth taking this deduction.
The IRS is happy to recognize your charitable donations with a tax deduction as long as you follow its rules. What most of us don’t realize is that your out-of-pocket expenses for charity work are also deductible. That means things like canned food purchased for a soup kitchen, miles driven to get to a volunteer posting, or money spent on paper to print a newsletter are deductible. You need to keep good records and itemize your deductions to take advantage of this deduction.
Not-so-serious advice certainly makes for more interesting reading, even if it only evokes feelings of gratitude that the advice doesn’t pertain to you this year. But if you found yourself playing jazz incognito in a smoky club in SoHo, there are at least three deductions you should not miss.
The IRS allows you to deduct your clarinet lessons if you can get your dentist to sign off on the lessons as necessary to correct an overbite. If your goal is to be more like Woody Allen, the famous jazz clarinetist and movie director, and less like a beaver, you can learn to play the clarinet and deduct the cost of your lessons.
Deductions for medical expenses require good record keeping and are only allowable if they total more than 10% of your adjusted gross income. Most of us find medical and tax issues to be dull topics with the exception of the deduction allowed for wigs. If you can get your doctor to agree that a wig is necessary for your mental health after losing your hair to a disease, you can deduct the cost of your wig. Sadly, you can’t use this deduction for a wig used to get over an atrocious hair cut.
Finally, any program to help you stop smoking is tax deductible as a medical expense. You can’t include non-prescription items like nicotine patches or gum, but you can’t have everything. If you are moving on from your days of playing jazz clarinet in a smoky bar, the IRS is happy to help you give up cigarettes.