- Keep donation receipts. The receipt needs the date, the amount, the name of the charity. No receipt means no deduction.
- The above holds for cash or non-cash contributions. Clothes and household goods must be in good or better condition to get the deduction.
- Starting with 2007 returns, the law has required a receipt or some sort of written confirmation for all charitable donations. Take pictures of non-cash contributions if you think necessary or you have plenty to donate as proof and records of items. You can deduct only up to 50% of your adjusted gross income. At that point the audit risk becomes very likely.
- Health care expenses must exceed the 7.5% income threshold to be useful for deductions. The total expenses that exceed 7.5% of your adjusted gross income are deductible. These can include health insurance premiums (Which usually already pre-tax for most employees).
- Investment and tax planning expenses are part of miscellaneous itemized expenses. The total must exceed 2% AGI before it can be use for tax deductions. Includes: employee business expenses, tax preparation fees, portion of legal or accounting fees relating to tax planning, annual fee paid to broker and any IRA fees paid directly, investment publications on subscription, investment newspapers bought off the newsstands, phone calls and mileage to talk/go to see brokers and investment advisors.
- Retirement tax credit, see Publication 17, page 244
- Educational deductions - The courses don't even have to be job-related, but can't be for any education involving sports, games, or hobbies. Your company can pay and deduct as much as $5,250 per year in educational assistance paid for either undergraduate or graduate courses. The assistance comes to you tax-free. (source: MSN)
What’s the difference between a tax exemption and a tax deduction?
Tax exemptions and tax deductions both reduce your taxable income. Exemptions, however, are set amounts by which you reduce your taxable income based on yourself, your spouse and your dependents. In 2008, each exemption reduces your taxable income by $3,500 ($3,650 for 2009).
Deductions, on the other hand, are actual expenses that reduce your taxable income. You can deduct expenses such as alimony, capital losses and moving expenses whether or not you itemize your deductions. You can deduct other expenses, such as medical costs, mortgage interest, and charitable contributions, only if you itemize your deductions.Sources: MSN MoneyCentral articles.
What should be logged on a mileage log record kept for tax purposes?
If you have legitimate business expenses or investment expenses involving mileage, log the following information on your mileage log:
- Beginning and ending mileage from vehicle's odometer for each trip.
- Description of origin (From) and description of destination (To) for each trip.
- Description of business reason for the trip.
