TAX DEDUCTIONS

Are you claiming all the tax benefits that help you keep your hard- earned income?

Use the list below to identify deductible expenses that can work in your favor. You may find many ways to save money on your taxes. Don't miss your chance for a smaller tax bill or a larger refund.

Home Mortgage Interest Deduction Allows deduction for:

• All Interest Paid on a Home Purchase Loan if not greater than $1,000,000
• Points if the loan is for a new purchase
• Interest on Home Equity Loans that do not exceed $100,00
• Mortgage Interest Premiums--if the taxpayer’s gross income is less than$100,000, phasing out at higher income levels.

Property and Other Real Estate Taxes:

Indiana uses federal adjusted gross income (AGI), which is federal income before itemized deductions, as the beginning point of calculating taxable income.

Indiana like many states does not allow itemized deductions available under the Internal Revenue Code

• Indiana does allow a deduction for real estate taxes paid on a personal residence up to $2,500 per year.

OTHER ITEMIZED DEDUCTIONS:

State and Local Income Taxes

Charitable Contributions

Depending on charity type these are limited to 30% or 50% of adjusted gross income.

Charitable contributions include:

• Cash contributions
• Property contributions (such as Goodwill donations) and
• Mileage for charitable work (at a reduced rate of 14 cents per mile).

Medical Expenses:

• Must exceed 7.5% of income before they can be claimed.
• These include health insurance premiums as well as uninsured medical expenses.
• Employee contributions to employer provided health insurance qualify.
• Mileage for medical care (at reduced medical rate of 14 cents per mile)

Employee Business Expenses:

• Must exceed 2% of adjusted gross income before they may be claimed.
• Business mileage at current year rate of 51 cents per mile or actual expenses
• Travel expenses for business travel away from home
• Lodging and Transportation expense
• Meals and Entertainment limited to 50% of amount documented
• Business Phone usage
• Professional and union dues
• Home office expense if employer provides no office

Casualty Losses:

• Casualties include uninsured losses (including deductible) from theft and natural disasters such as hurricanes, earthquakes, floods and tornados.
• If your area is declared a disaster area, the 10% limitation may be waived.

MOVING EXPENSES are not itemized deductions so all taxpayers may claim. Two tests must be met:

1. Distance: Your new work location must be at least 50 miles further from your home than your old job location.

2. Time: You must work full time for at least 39 weeks during the year or 78 weeks during the first two years.

Reimbursements for Moving Expenses:

These are reported on your Form W2 in two ways:

1. If pursuant to an accountable plan they are not included in wages but shown in Box 12.

2. If not pursuant to a plan they are included in wages and also listed separately.

3. You may deduct if the reimbursement is for an allowable moving expense item.

Deductible Moving Expenses: There are two types: Transportation of household goods and Travel

Transportation of Household Goods

You can deduct the cost of packing, crating, and transporting your household goods and personal effects and those of the members of your household from your former home to your new home. This includes:

• The cost of shipping your car and your household pets to your new home.
• The costs of connecting or disconnecting utilities

If you use your own car to move your things, you can deduct either mileage at 16.5 cents per mile or the actual costs of gas and tolls.

Travel: Any amounts paid to for fares for your move

Travel by car.  If you use your car to take yourself, members of your household, or your personal effects to your new home, you can figure your expenses by deducting either:

If you use your car to take yourself, members of your household, or your personal effects to your new home, you can figure your expenses by deducting either:

1. Your actual expenses, such as the amount you pay for gas and oil for your car, if you keep an accurate record of each expense, or

2. The standard mileage rate of 16½ cents per mile and

3. Parking and tolls regardless of the method you use

4. You cannot deduct the following items as moving expenses.

• Expenses of buying or selling a home (including closing costs, mortgage fees, and points).
• Expenses of entering into or breaking a lease.
• Home improvements to help sell your home.
• Loss on the sale of your home.
• Mortgage penalties.
• Pre-move house hunting expenses.
• Return trips to your former residence.
• Security deposits (including any given up due to the move).

ITEMIZED DEDUCTIONS VERSUS THE STANDARD DEDUCTION

Every taxpayer receives a Standard Deduction based on the taxpayer’s filing status:

 These amounts are adjusted for inflation each and for 2011 are:

• Single Taxpayers: $5,800
• Married Filing Jointly: $11,600
• Married Filing Separately $5,800
• Head of Household: $8,500
• Taxpayers over 65: Add $1,450 for each taxpayer over 65

Taxpayers itemize if the total of their itemized deductions exceed these amounts.

Itemized deductions reduce taxable income by more than the standard deduction and reduce tax.