Copyright 2006 Kristine McKinley
How many times have you done your taxes, and a week or a month
later realized you forgot a deduction? The tax law is very
complicated, so it's easy to miss a deduction or two. In my
experience, these are the top 5 missed deductions.
1. Non-Cash Donations
Did you clean out your closets this year? Chances are you
donated those items to Goodwill or a similar non-profit
organization. The value of donated items (clothing, furniture,
etc.) is deductible. You will need to get a written receipt and
assign a value to these items, but the tax savings are worth the
effort.
2. Points on Refinancing
With interest rates so low the past few years, there have been a
record-number of houses refinanced. If you refinanced, you may
have paid points to get a lower interest rate. These points are
deductible over the life of the new loan. In addition, if you
incurred points on an old refinancing, any unamortized points
are deductible in the year of the new refinancing.
3. Educator Expenses
If you're a qualified educator (teacher, aide, instructor or
principal), you can deduct up to $250 for materials you bought
for the classroom. Qualified expenses include books, supplies,
and computer equipment. This law is set to expire in 2006, so
take advantage of it now if you qualify.
4. Investment and Tax Expenses
Expenses for tax planning and investment advice are deductible
as a miscellaneous deduction, subject to the 2% Adjusted Gross
Income (AGI) limitation. Expenses that qualify include tax
preparation fees, safe deposit box fees, fees paid to investment
advisors, legal and accounting fees related to tax planning,
broker and IRA fees paid directly, investment publications, and
more. Many people assume that they won't have enough
miscellaneous expenses to exceed the 2% AGI floor, but all of
these expenses combined can be substantial, especially if you
have unreimbursed employee expenses to add to these expenses.
5. College Savings or 529 Plan Contributions
Depending on which state you live in, contributions to 529
college savings plans may be deductible on your state income tax
return. Because this deduction is only available on the state
return (no deduction available on your federal return for 529
contributions), many people fail to include this deduction on
their state tax return.
About the author:
Kristine A. McKinley, CFP, CPA, and founder of Beacon Financial
Advisors, teaches individuals and families how to invest and
plan for retirement, college, and other financial goals.
Kristine offers financial and tax planning on an hourly,
fee-only basis. To sign up for free financial planning tips,
worksheets, checklists and more, visit
http://www.beacon-advisor.com .
