So she can deduct only $150 in medical expenses. But only expenses above $3,150 (7.5% of $42,000) are deductible for Charlotte. Charlotte works in a job with medical insurance and has an adjusted gross income of $42,000, She had out-of-pocket medical expenses totaling $3,300. Let's take the example of Charlotte, a single mom filing as a head of household. (For more on medical expense deductions, click here.) So most people, while they may feel their out-of-pocket medical costs are high, will not qualify for much of any medical deduction unless they have a catastrophic illness or a family member in a nursing home. Here's another catch: You can only deduct medical expenses to the extent they exceed 7.5% of your income. Even though those insurance premiums are a big and rising expense, they aren't deductible since they come out of untaxed money. One point of confusion: Many people help pay for their health insurance with pre-tax money taken out of their pay. (Note: If you're self-employed, the cost of medical insurance is deductible on more favorable terms on your Schedule C.) The list of allowed medical deductions is long and includes out-of-pocket expenses such as medical co-pays, dental work, glasses, $0.24 per mile to get to and from medical appointments, nursing home costs, health and long-term care insurance and even the cost of adding a wheelchair ramp to your home. You want to pick the door that will get you a bigger deduction.ΔΆ.
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1 are all your receipts and behind door No. The common complaint I hear is: "I don't get to take anything anymore." I explain it as "Let's Make A Tax Deal." Behind door No. With such add-ons, the standard deduction can quickly become a large number, and more beneficial than deducting your actual expenses.
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You use Schedule L to claim the extra real estate tax deduction, certain casualty losses and a special deduction for sales tax on a new vehicle purchased after Feb. In fact, there are so many special breaks the Internal Revenue Service created a new tax form this year: Schedule L, Standard Deductions for Certain Filers. In addition, for 2009 filers using the standard deduction can claim some extra breaks, including a $1,000 per couple ($500 for a single) deduction for real estate taxes paid. There are additions to these standard amounts for those who are blind or over age 65. A head of household (a single parent with kids, for example) gets a standard deduction of $8,350. The base amount for 2009 is $5,700 for a single filer and double that-$11,400-for a married couple filing jointly. The standard deduction is an amount assigned to each filing status. The standard deduction isn't so small or so standard.
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So it helps to understand why you may be better off not itemizing, particularly this year. Often people are left feeling a little cheated and confused by the process.