Whether you filed for a tax extension and have yet to file your 2014 taxes, or you’re simply thinking ahead to next tax season, it’s important to know the facts about tax deductions.
After all, the United States Tax Code is getting bigger—the Tax Foundation says that the entire body of the tax code has grown to 70,000 pages—and all of those details, procedures, and pronouncements can obscure the basic information about what you may and may not deduct or claim.
Let’s clear up a few myths:
1. Claiming your main squeeze as a dependent. You may claim a boyfriend or girlfriend as a qualifying relative if you have provided more than half of his or her support, he or she lived with you for the entire year, and his or her income was less than the personal exemption amount. (In 2014, the amount was $3,950; this year it’s $4,000.)
If you support your partner’s child, you may also claim that child, as long as no one else has already claimed him or her. However, you are only eligible for the dependent exemption, not the head of household deduction.
2. Making IRA contributions based on alimony income. You must have earned income (a job or business profits) in order to contribute to an IRA, and your IRA contribution can only be as high as your earned income—up to the IRA contribution limits, of course. But what if all your income comes from alimony? The IRS says that taxable alimony and separate maintenance payments qualify you to make IRA contributions.
Other income sources that count include taxable scholarships, non-taxable combat pay, union strike benefits, certain long-term disability benefits received prior to minimum retirement age, and the exercising of non-qualified stock.
3. Tax deductions related to medical treatments. People have been known to try (and fail) to write off some bizarre medical expenses. However, the procedures they are allowed to deduct might surprise you. For example, acupuncture and other established Eastern medical treatments count—as long as a physician prescribes them in writing.
Organ donors’ costs, including transportation, are deductible. People often forget to track their mileage (2014, $.23.5; 2015, $.23) and parking costs for their medical visits. If you haven’t kept the receipts, you can re-create both pieces of information by looking at your appointment book.
The cost of attending medical conferences related to an illness you have or that your spouse or family member has is also deductible.
When it comes to medical travel, you may deduct the cost of travel for the patient and one companion. Lodging costs are limited to $50 per person, per night. If the treatment requires a month to complete, the entire stay may be deducted.
Read IRS Publication 502 to discover many more medical deductions you probably didn’t know you could claim.
What can’t you deduct? You still may not claim any deductions for one of the most important members of your family—your pet. But, who knows, that may come about one day.
Eva Rosenberg, EA is the publisher of TaxMama.com ®, where your tax questions are answered. She is the author of several books and ebooks, including Small Business Taxes Made Easy. Eva teaches terrific courses that might help individuals and small businesses at CPE Link.