Q. What is "itemizing"? How can I tell if it will help
A. You itemize deductions by filing Schedule A with Form 1040. On Schedule A, you list
amounts you paid during the year for certain items such as medical and dental care, state
and local income taxes, real estate taxes, home mortgage interest, and gifts to charity.
If your itemized deductions are more than your standard deduction, your federal income tax
will be less if you itemize. For additional information refer to Tax Topic 501, Should I
Q. My father is in a nursing home and I pay for the entire cost.
Can I deduct this on my tax return?
A. You may deduct qualified medical expenses you pay for yourself, your spouse, and
your dependents, including a person you claim as a dependent under a Multiple Support
Agreement. You can also deduct medical expenses you paid for someone who would have
qualified as your dependent except that the person did not meet the gross income or joint
Nursing home expenses are allowable as medical expenses in certain instances. If you,
your spouse, or your dependent is in a nursing home or home for the aged, and the primary
reason for being there is for medical care, the entire cost, including meals and lodging,
is a medical expense. If the individual is in the home mainly for personal reasons, then
only the cost of the actual medical care is a medical expense, and the cost of the meals
and lodging is not deductible.
You must itemize deductions on Schedule A, Form 1040, to claim a medical expense
deduction. You can include only the medical expense paid during the year, regardless of
when the services were provided. Your total medical expense for the year must be reduced
by any insurance reimbursement. Your total medical expenses must be reduced by 7.5% of
your adjusted gross income. You may claim the remainder as an itemized deduction.
For additional information on medical expenses, refer to Tax Topic 502, or Publication
502, Medical and Dental Expenses.
Q. I paid my mother's real estate taxes in 1996. Can I deduct
this on my tax return?
A. Generally, you can deduct only taxes that are imposed on you. For additional
information on deductible taxes, refer to Tax Topic 503.
Q. I refinanced my home in 1996 and paid "points". Can
I deduct the entire amount as interest on my 1996 return?
A. No. Points paid solely to refinance your home mortgage cannot be deducted in the
year paid. Instead, they must be deducted over the life of the loan. For more details,
refer to Tax Topic 504, Home Mortgage Points, or Publication 936, Home Mortgage Interest
Q. Can I take a deduction for the interest I paid on my student
A. You may not deduct personal interest. Personal interest includes interest paid on
car loans, credit cards, and personal loans such as student loans. For additional
information on deductible interest, refer to Tax Topic 505, Interest Expense.
Q. I donated a used car to a qualified charity. Do I need to
attach any special forms to my return to take a deduction for a charitable contribution?
A. You must fill out Section A of Form 8283, Noncash Charitable Contributions, if your
total deduction for all noncash contributions is more than $500. If you make a
contribution of noncash property worth more than $5,000, generally an appraisal must be
done. In that case, you also fill out Section B of Form 8283. Attach Form 8283 to your
return. For a contribution of $250 or more, you can claim a deduction only if you obtain
written acknowledgement from the qualified organization. For more information on this
requirement, refer to Publication 526, Charitable Contributions. For general information
on charitable contributions, refer to Tax Topic 506, Contributions.
Q. Our garage caught fire this last July. Can we claim a loss on
our income tax return?
A. If you lose property through casualty or theft, you may be entitled to a tax
deduction. A casualty is the damage, destruction, or loss of property resulting from an
identifiable event that is sudden, unexpected, or unusual in nature. Some examples of
casualties include car accidents, fires, and vandalism. If your property is covered by
insurance, you cannot deduct a loss unless you file a timely insurance claim for
reimbursement. To claim a casualty or theft loss, you must complete Form 4684, Casualties
and Thefts, and attach it to your return. A nonbusiness casualty or theft loss may be
claimed only if you itemize deductions on Schedule A, Form 1040. If your loss took place
in a declared disaster area, please refer to Tax Topic 515, Disaster Area Losses
(Including Flood Losses). For additional information, refer to Form 4684, or Tax Topic
507, Casualty Losses, or Publication 547, Casualties, Disasters, and Thefts (Business and
Nonbusiness). If many items are involved, also refer to Publication 584, Nonbusiness
Disaster, Casualty, and Theft Workbook.
Q. I went through a divorce in 1996 and paid a lot of legal fees.
Are these deductible on my tax return?
A. Legal fees for the divorce itself and for property settlement are not deductible,
however, legal fees to collect taxable income, such as alimony, are deductible as
miscellaneous itemized deductions on Form 1040, Schedule A. Most miscellaneous itemized
deductions are subject to the 2% limit. This means you can deduct the amount left after
you subtract 2% of your adjusted gross income from their total. For additional
information, refer to Tax Topic 508, Miscellaneous Expenses, and Publication 529,
Q. I use part of my living room as an office. Can I take a
deduction for business use of my home?
A. In general, if you use a part of your home for both personal and business purposes,
no expenses for business use of that part are deductible. Exceptions apply for qualified
day-care providers and for the storage of inventory or product samples used in the
business. For additional information on business use of your home, refer to Tax Topic 509,
or Publication 587, Business Use of Your Home (Including Use by Day-Care Providers).
Q. I use my home for business. Can I deduct the expenses?
A. If you use part of your home exclusively and regularly as the principal place of
business or as a place where you meet or deal with customers you may deduct expenses for
use of part of your home. If you decuct your business expenses on Schedule C (Form 1040),
you must figure your deduction on Form 8829, Expenses for Business Use of Your Home, and
attach it to Form 1040 with Schedule C. For more information refer to Tax Topic 509,
Business Use of Home, or Publication 587, Business Use of Your Home (Including Use by
Q. What are the standard mileage rates for 1996?
A. For 1996, the standard mileage rate is 31 cents a mile for all business miles (46.5
cents a mile for U.S. Postal Service employees with rural routes). The rate for moving or
medical reasons is 10 cents a mile. The rate for travel for charitable volunteer work is
12 cents a mile. For more information, refer to Tax Topic 510, Business Use of Car, or
Publication 463, Travel, Entertainment, and Gift Expenses.
Q. For business travel, are there limits on the amounts
deductible for meals?
A. Meal expenses are deductible only if your trip is overnight or long enough that you
need to stop for sleep or rest to properly perform your duties. Generally, the deduction
for unreimbursed business meals is limited to 50% of the cost.
Instead of keeping records of your meal expenses and deducting the actual cost, you can
generally deduct a standard meal allowance ranging from $26 to $38 depending on where and
when you travel. For more information on business travel expenses and restrictions, refer
to Tax Topic 511, or Publication 463, Travel, Entertainment, Gift, and Car Expenses.
Q. Are business gifts deductible?
A. If you give business gifts in the course of your trade or business, you can deduct
the cost subject to special limits and rules. In general, you can deduct no more than $25
for business gifts you give directly or indirectly to any one person during your tax year.
Exceptions may apply. For additional information, refer to Tax Topic 512 and Chapter 28 of
Publication 17, Your Federal Income Tax.
Q. I took an accounting course in order to keep my salary on my
current job. My employer did not reimburse me for the expenses. Can I take a deduction on
my tax return for the cost of the course?
A. You may be able to deduct work-related educational expenses as an itemized deduction
on Form 1040, Schedule A. To be deductible, your expenses must be for education that:
1.Maintains or improves skills required in your present job, or
2.Serves a business purpose and is required by your employer, or by law or regulations,
to keep your salary, status, or job.
Your expenses are not deductible if the education is required to meet the minimum
educational requirements of your job or is part of a program that will lead to qualifying
you in a new trade or business. For additional information on deductible educational
expenses, refer to Tax Topic 513, or Publication 508, Educational Expenses.
Q. I am an employee. What form do I use to claim business
expenses for local transportation?
A. Generally, you must use Form 2106, Employee Business Expense, or Form 2106-EZ,
Unreimbursed Employee Business Expenses, to figure your deduction for employee business
expenses, and attach if to your Form 1040. Your deductible expense is then taken to
Schedule A, Form 1040, as a miscellaneous itemized deduction subject to the 2% of adjusted
gross income limit. Special rules may apply, depending on your employer's reimbursement
arrangement. For additional information, refer to Publication 463, Travel, Entertainment,
Gift, and Car Expenses, and Tax Topic 514, Employee Business Expense.
Q. Our home was seriously damaged by flooding in 1996. Are there
special provisions for claiming a loss since our home is located in a declared disaster
A. Casualty losses are generally deductible only in the year the casualty occurred.
However, if you have a deductible loss from a disaster in an area that is officially
designated by the President of the United States as eligible for federal disaster
assistance, you can choose to deduct that loss on your return for the year immediately
preceding the loss year. In other words, you may treat the loss as having occurred in
either the current year or the previous year, whichever provides the best tax results for
you. If you have already filed your return for the preceding year, the loss may be claimed
by filing an amended return, Form 1040X. For additional information on disaster area
losses (including flood losses), refer to Tax Topic 515, or Publication 547, Casualties,
Disasters and Thefts (Business and Non-Busines). Publication 584, Nonbusiness Disaster,
Casualty, and Theft Loss Workbook, can be used to help you catalog your property.
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