What Can I Deduct?

Can I deduct my tuition?

You're a college student, you're going to school, you're working part time and you're paying your tuition and you're wondering, "Do I get any benefit out of this tuition other than a good education?"There are some education credits that you can get going to college. It doesn't necessarily have to be college, it could be trade school, but it has to be secondary school, post twelfth grade. Those deductions are deductible on the tax return. They may either be a deduction on the tax return or they may be a credit. It depends on your tax return and it depends on filling out the form. The form will tell you whether it's better to take it as a deduction, or take it as a credit.

Can I deduct my child's tuition?

You know, you have your children going to school and you're wondering, "You know, I'm paying that college fee, that college tuition for them, do I as the parent get any deduction?" Yes, you can get an education credit for paying the tuition for your children to go to school as long as the children are your dependents, on your tax return, under the age of 23, and a full-time student. Which normally is defined as carrying at least 12 units, or however your college defines full-time student. Now bear in mind that in order to get this education credit for your children, it's got to be in college or trade school. It's got to be above the high school level.

Can I deduct my home office?

If you are using your home for a home office deduction you need to understand that the home office deduction is very restrictive. The room has to be exclusively used as a home office. You can't just use the kitchen table on Sunday afternoon and say I am using my home as a home office, it's got to be a room specifically set aside for an office and that's all. It can't be a home office sometime and a sewing room the next time. It's got to be a home office. When you get into dealing with a home office it's available whether you own the home or whether you are renting your home. So, because of the complexity of the home office rules, I suggest that before you venture into this area you seek the assistance of a professional.

Can I deduct my medical and dental costs?

At the top of Schedule A it says "medical deductions". Medical deduction could be prescription drugs, could be co-payments to the doctor, hospital expenses, nursing home care, medical insurance. All of those things are deductible as medical deductions, but bear in mind when you look at that section of Schedule A of the itemized deduction form, it's going to have you total up all of these medical deductions and then there's a line on there which says "enter 7.5% of your adjusted gross income". That "adjusted gross income" figure comes from the bottom of the front page of the form 1040. Assuming, for simplicity's sake, you had $100,000 worth of adjusted gross income, 7.5% is $7500. That means your medical expenses, to be deductible, have to exceed that $7500. If they don't, you don't get to deduct any of your medical expenses. If they do exceed $7500, you only get to deduct the amount in excess of that $7500. The form, again, will lead you by the hand through this, though don't be concerned about trying to remember these numbers.

Can I deduct my IRA contributions?

When you're looking at the tax return, you'll notice on the bottom part of the 1040 form that there's a line there that says "IRA contribution." You've heard about IRAs and you wonder what they are. Well, as an individual having earned income - money that you make from your blood, sweat, and tears. It's not dividends, it's not interest, it's not rental income; it's money from earnings. - If you have earned income, you can contribute to an IRA account. For 2006, if you're under 50 years old you can put up to $40,000 into an IRA account. The nice thing about an IRA account is you don't have to put the money into it until April 15th of the subsequent year. If you look at your 2006 tax return, you have until April 15th of 2007 to make the contribution to your IRA account. Bear in mind if you're over 50 years old there's a catch-up provision; you can put up to $50,000 into your IRA account.

Can I deduct my travel?

Generally travel is not deductible when it's for vacation or pleasure. If you are a self-employed individual, you are in business and had to travel for your business – say you're in Los Angeles and had to go to San Francisco for a business trip - that travel would be deductible because it's related to your business. If you happen to travel to San Francisco because you wanted to visit your aunt and uncle, that's strictly pleasure and so not deductible.

Can I deduct my alimony payments?

You're putting all your paperwork together, and there it is, the ex-wife or ex-husband is getting alimony payments is that deductible? If you look at that section of the tax return, that adjustments to income, at the bottom of 10-40, you'll see a line there that says “alimony.” If you're paying alimony, it's deductible. You need to have the person's name and social security number, that you're paying the alimony to, and it's fully deductible. On the other side of the coin, if you're the recipient of alimony, it's income.