In last week's article there was a typographical error regarding the form that goes with the Schedule D. Form 8949 is the form that lists security transactions, not Form 8979.
Thank you to the reader who brought this to my attention.
Now that you know what documents to collect, you should begin to look at what you can deduct. Deductions lower your taxable income so it's important to have accurate records to take the deduction.
Most deductions are itemized on the Schedule A. To clarify when to itemize: If your deductions are more than the standard deduction, you should itemize.
The standard deductions for 2012 are: Married Filing Jointly -- $11,900; Single and Married Filing Separately -- $5,950; and, Head of Household -- $8,700. If you have expenses such as medical, charitable, mortgage interest, state income taxes paid, real estate taxes, or business expenses totaling more than the standard deduction, it would be to your benefit to itemize.
For the next few weeks, begin to gather the receipts needed to take deductions. For medical expenses, request a statement from the doctor, dentist, chiropractor, therapist, hospital, and long-term care, showing amounts paid for the year.
If prescriptions are filled at the same pharmacy, the pharmacy can print out a year-end report for amounts paid for medications. Deductions are only for amounts paid, not billed. It is extremely important to separate these bills.
You may only deduct amounts paid during the year for medical expenses. The statements from the doctor and pharmacy can help calculate medical miles. Mileage can be deducted for medical visits, trips to pharmacy and hospital at a rate of .23 cents per mile. Medical expenses must exceed 7.5 percent of the adjusted gross income to be deductible.
Charitable miles can be deducted at a rate of .14 cents per mile. Charitable miles are miles incurred while volunteering or taking donations to charitable agencies.
Mortgage Insurance Premiums are no longer deductible on the Schedule A. However, mortgage interest and real estate taxes paid are deductible.
Gambling losses can only offset the gambling winnings; losses cannot exceed winnings. Receipts are needed that show the amount of losses. Gambling losses are only for the year of the gambling winnings.
Business expenses are subject to 2 percent of the adjusted gross income before being deductible. Business expenses are ordinary and necessary expenses paid to do your job. These can include; uniforms, steel-toed shoes, union dues, mileage, travel, lodging, tolls, parking, meals and equipment or tools.
It is extremely important to track these receipts. Miles must be recorded with destination, purpose, and beginning and ending miles. Receipts for meals must include who the meal was with, and the purpose.
With only a few more weeks before the tax filing season, start gathering those receipts to take advantage of these deductions.
Tracy Bunner is an enrolled agent and tax preparer with an office in Harrisville. She can be reached at 801-686-1995 or at firstname.lastname@example.org.