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Trust SKS Tax Service to uncover and find all the credits
and deductions you are entitled to. With our expertise, you
will be given the maximum refund amount.
The following deductions are:
Personal Property Taxes
Personal property tax is deductible if it is a state
or local tax that is:
• Charged on personal property,
• Based only on the value of the personal property, and
• Charged on a yearly basis, even if it is collected more
or less than once a year.
A tax that meets the above requirements can be considered charged
on personal property even if it is for the exercise of a privilege.
For example, a yearly tax based on value qualifies as a personal
property tax even if it is called a registration fee and is
for the privilege of registering motor vehicle or using them
on the highways.
Real Estate Taxes
Deductible real estate taxes are any state, local,
or foreign taxes on real property levied for the general public
welfare. You can deduct these taxes only if they are based on
the assessed value of the real property and charged uniformly
against all property under the jurisdiction of the taxing authority.
Deductible real estate taxes generally do not include taxes
charged for local benefits and improvements that increase the
value of the property. They also do not include itemized charges
for services (such as trash collection) assessed against specific
property or certain people, even if the charge is paid to the
taxing authority.
Mortgage Interest
Interest is an amount you pay for the use of borrowed
money. To deduct interest you paid on a debt you must be legally
liable for the debt. Additionally, you generally must itemize
your deductions, unless the interest is on rental or business
property or on a student loan.
Home mortgage interest is interest you pay on a loan secured
by your main home or a second home. The loan may be a mortgage
to buy your home, a second mortgage, a home equality loan, or
a line of credit.
Our main home is where you live most of the time. It can be
a house, cooperative apartment, condominium, mobile home, house
trailer, or house boat that has sleeping, cooking, and toilet
facilities.
A second home can include any other residence you own, and treat
as a second home. You do not have to use the home during the
year. However, if you rent it to others, you must also be able
to use it as a home during the year for more than the greater
of 14 days or 10% of the number of days you rent tit, for the
interest to qualify as home mortgage interest.
Home mortgage interest and points are generally reported to
you on Form 1098, Mortgage Interest Statement, by the financial
institution to which you made the payments.
Home Mortgage Points
The term “points” is used to describe certain
charges paid to obtain a home mortgage. Points may be deductible
as home mortgage interest, if you itemize deductions on Form
1040, Schedule A. If you can deduct all of the interest on your
mortgages, you maybe able to deduct all of the points paid on
the mortgage.
You can deduct all the points in full in the year they are paid,
if all the following requirements are met:
1. Your loan is secured by your main home (the
one you live in most of the time).
2. Paying points is an established business practice in your
area.
3. The points paid were not more than the amount generally charged
in that area.
4. You use the cash method of accounting. This means you report
income in the year you receive it and deduct the expenses in
the year you pay them.
5. The points were not paid for items that usually are separately
stated on the settlement sheet such as appraisal fees, inspection
fees, title fees, attorney fees, or property taxes.
6. The funds you provided at or before closing, plus any points
the seller paid, were at least as much as the points charged.
You cannot have borrowed the funds from your lender or mortgage
broker in order to pay the points.
7. You use your loan to buy or build your main home.
8. The points were computed as a percentage of the principal
amount of the mortgage, and
9. The amount is clearly shown on your settlement statement.
Mortgage Insurance Premiums
You can treat amounts you paid during 2007 for qualified mortgage
insurance as home mortgage interest. The insurance must be in
connection with home acquisition debt, the insurance contracted
must have been issued after 2006, and you must have paid the
premiums before 2008 for coverage in effect during 2007.
Qualified Mortgage Insurance
Qualified mortgage insurance is mortgage insurance
provided by the Department of Veteran Affairs, the Federal Housing
Administration, or the Rural Housing Service, and private mortgage
insurance (as defined in section 2 of the Homeowners Protection
Act of 1998 as in effect on December 20, 2006).
Mortgage insurance provided by the Department of Veterans Affairs
is commonly known as a funding fee. If provided by the Rural
Housing Service, it is commonly known as guarantee fee. These
fees can be deducted fully in 2007 if the mortgage insurance
contract was issued in 2007. Contact the mortgage insurance
issuer to determine the deductible amount if it is not reported
in box 4 of Form 1098.
Casualty and Theft
Generally you may deduct losses to your home, household
items and vehicles on your Federal income tax return. You may
not deduct casualty and theft losses covered by insurance unless
you file a timely clam for reimbursement and you must reduce
the loss by the amount of the reimbursement.
A casualty does not include normal war and tear or progressive
deterioration from age or termite damage. The damage must be
caused by a sudden, unexpected, or unusual event (e.g. car accident,
fire, earthquake, flood, vandalism).
Casualty
A casualty is the damage, destruction, or loss of property
resulting from an identifiable event that is sudden, unexpected,
or unusual.
• A sudden event is one that is swift, not gradual or
progressive.
• An unexpected event is one
that is ordinarily unanticipated and unintentional.
• An unusual event is one that is not a day-to-day occurrence
and that is not typical of the activity in which you were engaged.
Deductible Losses
Deductible casualty losses can result from a number
of different causes, including the following.
• Car accidents
• Earthquakes
• Fires
• Floods
• Government-ordered demolition or relocation of a home
that is unsafe to use because of a disaster
• Mine
cave-ins
• Shipwrecks
• Sonic booms
• Storms, including hurricanes and tornadoes
•
Terrorist attacks
• Vandalism
• Volcanic eruptions
Theft
A theft is the taking and removing of money or property
with the intent to deprive the owner of it. The taking of property
must be illegal under the law of the state where it occurred
and it must have been done with criminal intent.
Theft includes the taking of money or property by the following
means:
• Blackmail
• Burglary
• Embezzlement
• Extortion
• Kidnapping for ransom
•
Larceny
• Robbery
The taking of money or property through fraud or misrepresentation
is theft if it is illegal under state or local law.
Proof of Loss
To deduct a casualty or theft loss, you must be able
to show that there was a casualty of theft. You also must be
able to support the amount you show as a deduction.
Casualty loss proof
For a casualty loss, you should be able to show all the following:
• The type of casualty (car accident, fire, storm, etc.)
and when it occurred
• That the loss was a direct
result of the casualty
• That you were the owner of
the property, or if you leased the property from someone else,
that you were contractually liable to the owner for the damage.
• Whether a claim for reimbursement exists for which there
is a reasonable expectation of recovery.
Theft loss proof
For a theft loss, you should be able to show all the following:
• When you discovered that your property was missing
• That your property was stolen
• That you were
the owner of the property
• Whether a claim for reimbursement exists for which there
is a reasonable expectation of recovery
Miscellaneous Deductions
Tax Preparation Fees
You can usually deduct tax preparation fees in the
year you pay them. Thus, on your 2007 return, you can deduct
fees paid in 2007 for preparing your 2006 return. These fees
include the cost of tax preparation software programs and tax
publications. They also include any fee you paid for electronic
filing of your return. However, if you paid your tax by credit,
you cannot deduct the convenience fee you were charged.
Safe Deposit Box Rent
You can deduct safe deposit box rent if you use the
box to store taxable income-producing stocks, bonds, or investment-related
papers and documents. You cannot deduct the rent if you use
the box only for jewelry, other personal items, or tax-exempt
securities.
Legal Expenses
You can usually deduct legal expenses that you incur
in attempting to produce or collect taxable income or that you
pay in connection with the determination, collection, or refund
of any tax.
You can also deduct legal expenses that are:
• Related to either doing or keeping your job, such as
those you paid to defend yourself against criminal charges arising
out of your trade or business,
• For tax advice related to divorce,
if the bill specifies how much is for tax advice and it is determined
in a reasonable way, or
• To collect taxable alimony
Investment Fees and Expenses
You can deduct investment fees, custodial fees, trust
administration fees, and other expenses you paid for managing
your investments that produce taxable income.
Hobby Expenses
You can generally deduct hobby expenses, but only up
to the amount of hobby income. A hobby is not a business, because
it is not carried to make profit.
Home Office
If you use part of your home regularly and exclusively
for business purposes, you may be able to deduct a part of the
operating expenses and depreciation of your home.
You can claim this deduction for the business use as part of
your home only if you use that home regularly and exclusively:
• As your principal place of business for any trade or
business,
• As a place to meet or deal with your patients, clients,
or customers in the normal course of your trade or business,
or
• In the case of a separate structure not attached to
your home, in connection with your trade or business.
The regular and exclusive business use must be for the convenience
of your employer and not just appropriate and helpful in your
job.
Job Search Expenses
You can deduct certain expenses you have in looking
for a new job in your present occupation, even if you do not
get a new job. You cannot deduct these expenses if:
• You are looking for a job in a new occupation,
• There
was a substantial break between the ending of your last job
and your looking for a new one, or
• You are looking for a job for the first time.
Employment and Outplacement Agency Fees
You can deduct employment and outplacement agency fees you pay
in looking for a new job in your present occupation.
Résumé
You can deduct amounts you spend for preparing and
mailing copies of a résumé to prospective employers
if you are looking for a new job in your present occupation.
Travel and transportation Expenses
If you travel to an area and, while there, you look
for a new job in your present occupation, you may be able to
deduct travel expenses to and from the area. You can deduct
the travel expenses if the trip is primarily to look for a new
job. The amount of time you spend on personal activity compared
to the amount of time you spend in looking for a work is important
in determining whether the trip is primarily personal or is
primarily to look for a new job.
Even if you cannot deduct the travel expenses to and from an
area, you can deduct the expenses of looking for a new job in
your present occupation while in the area.
You can choose to use the standard mileage rate to figure your
car expenses. The rate for business use of a vehicle is 48½
cents per mile.
Licenses and Regulatory Fees
You can deduct the amount you pay each year to state
or local governments for licenses and regulatory fees for your
trade, business, or profession.
Research Expenses of a College Professor
If you are a college professor, you can deduct research
expenses, including travel expenses, for teaching, lecturing,
or writing and publishing on subjects that relate directly to
your teaching duties. You must have undertaken the research
as a means of carrying out the duties expected of a professor
and without expectation of profit apart from salary. However,
you cannot deduct the cost of travel as a form of education.
Tools Used in Your Work
Generally, you can deduct amounts you spend for tools
used in your work if tools wear out and are thrown away within
1 year from the date of purchase. You can depreciate the cost
of tools that have a useful life substantially beyond the tax
year.
Union Dues and Expenses
You can deduct dues and initiation fees you pay for
union membership.
You can also deduct assessments for benefit payments to unemployed
union members. However, you cannot deduct the part of the assessments
or contributions that provides funds for the payment of sick,
accident, or death benefits. Also, you cannot deduct contributions
to a pension fund, even if the union requires you to make the
contributions.
You may not be able to deduct amounts you pay to the union that
are related to certain lobbying and political activities.
Work Clothes and Uniforms
You can deduct the cost and upkeep of work clothes
if the following two requirements are met.
• You must wear them as a condition of your employment.
• The clothes are not suitable for everyday wear.
It is not enough that you wear distinctive clothing. The clothing
must be specifically required by your employer. Nor is it enough
that you do not, in fact, wear your work clothes away from work.
The clothing must not be suitable for taking the place of your
regular clothing.
Examples of workers who may be able to deduct the cost and upkeep
of work clothes are: delivery workers, firefighters, health
care workers, law enforcement officers, letter carriers, professional
athletes, and transportation workers (air, rail, bus, etc.).
Musicians and entertainers can deduct the cost of theatrical
clothing and accessories that are not suitable for everyday
wear.
However, work clothing consisting of white cap, white shirt
or white jacket, white bib overalls, and standard work shoes,
which a painter is required by his union to wear on the job,
is not distinctive in character or in the nature of the uniform.
Similarly, the costs of buying and maintaining blue work clothes
worn by a welder at the request of a foreman are not deductible.
Protective Clothing
You can deduct the cost of protective clothing required
in your work, such as safety shoes or boots, safety glasses,
hard hats, and work gloves.
Examples of workers who may be required to wear safety items
are: carpenters, cement workers, chemical workers, electricians,
fishing boat crew members, machinists, oil field workers, pipe
fitters, steamfitters, and truck drivers.
Military Uniforms
You generally cannot deduct the cost of your uniforms
if you are on full-time active duty in the armed forces. However,
if you are an armed forces reservist, you can deduct the un-reimbursed
cost of your uniform if military regulations restrict you from
wearing it except while on duty as a reservist. In figuring
the deduction, you must reduce the cost by any nontaxable allowance
you receive for these expenses. If local military rules do not
allow you to wear fatigue uniforms when you are off duty, you
can deduct the amount by which the cost of buying and keeping
up these uniforms is more than the uniform allowance you receive.
You can deduct the cost of your uniforms if you are a civilian
faculty or staff member of a military school.
Gambling Losses Up to the Amount of Gambling Winnings
You must report the full amount of your gambling winnings
for the year on Form 1040. You deduct your gambling losses for
the year on Schedule A (Form 1040). You cannot deduct gambling
losses that are more than your winnings.
You cannot reduce your gambling winnings by your gambling losses
and report the difference. You must report the full amount of
your winnings as income and claim your losses (up to the amount
of winnings) as an itemized deduction. Therefore, your records
should show your winnings separately from your losses.
Diary of winnings and losses
You must keep an accurate diary or similar record of
your losses and winnings. Your diary should contain at least
the following information.
• The date and type of your specific wager or wagering
activity
• The name and
address or location of the gambling establishment
•
The names of other persons present with you at the gambling
establishment
• The amount(s) you won or lost
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