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Q: Am I eligible to claim both my job education expenses (minus 2% of AGI) and the Lifetime Learning Credit on my taxes?
- A:
If you are eligible to deduct educational expenses and are also eligible for the lifetime learning credit, then it is possible to claim both. You cannot use the SAME educational expenses ("no double benefit") to claim both benefits.
- You may choose to allocate some of your expenses to the deduction and others to the credit.
- This can be desirable because a qualifying expense for one benefit may not be a qualifying expense for the other tax benefit. For example, the cost of course-related books ordinarily qualifies for the deduction, but not for the lifetime learning credit.
For more information, refer to Form 8863 (PDF), Education Credits (Hope and Lifetime Learning Credits)
For more information, refer to Publication 970, Tax Benefits for Education
For work related education expenses, refer to Tax Topic 513, Educational Expenses
Q: How do I deduct and substantiate my gambling losses?
- A:
You can deduct gambling losses only if you itemize deductions. Claim your gambling losses as a miscellaneous deduction on IRS Form 1040, Schedule A. However, the amount of losses you deduct can't total more than the amount of gambling income you've reported on your return. It's important to keep an accurate diary or similar record of your gambling winnings and losses. To deduct your losses, you must be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses.
Refer to IRS Publication 529, Miscellaneous Deductions, for information on record keeping.
Q: Can I deduct alimony paid to my former spouse?
- A:
You can deduct alimony you paid, whether or not you itemize deductions on your return.
If you paid alimony to more than one person, enter the social security number of one of the recipients. Show the social security number and amount paid to each other recipient on an attached statemetn. Enter your total payments on line 31a.
If you do not provide your spouse's social security number, you may have to pay a $50 penalty and your deduction may be disallowed.
For additional information, see IRS Publication 504, Divorced or Separated Individuals.
Q: Can I deduct the cost of classes I need for work?
- A:
In some cases, you may be able to deduct the cost of classes you need for work.
This deduction is subject to the 2 percent of AGI limitation, along with most other miscellaneous itemized deductions you list on Form 1040, Schedule A (PDF), Itemized Deductions.
Q: I donated a used car to a qualified charity. I itemize my deductions, and I would like to take a charitable contribution for the donation. Do I need to attach any special forms to my return? What records do I need to keep?
- A:
You must attach Copy B of Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, to your income tax return in order to take a deduction for the contribution of a qualified vehicle with a value of more than $500.
- If you do not attach this form to your return when required, the IRS will disallow your deduction.
- If the value of the donation is over $5,000, a written appraisal is required.
If you claim a deduction on your return of over $500 for all contributed property, you must attach a Form 8283 (PDF), Noncash Charitable Contributions, to your return.
- If you claim a total deduction of $5,000 or less for all contributed property, you need only complete Section A of Form 8283(PDF).
- If you claim a deduction of more than $5,000 for an item or a group of similar items, you generally need to complete Section B of Form 8283 (PDF) which requires, in most cases, an appraisal by a qualified appraiser.
- You will need to obtain and keep evidence of your car donation and be able to substantiate the fair market value of the car.
- If you are claiming a deduction of $250 or more for the car donation, you will also need a written acknowledgment prepared by the charity at the time of donation, that includes a description of the car and a statement of whether the charity provided any goods or services in return for the car and, if so, a description and estimate of the fair market value of the goods or services.
Additional resources:
Q: I have a mortgage for my primary residence and a second mortgage for land that I intend to build a home on. Can I deduct the interest for the second mortgage?
Q: I moved to a different state to accept a new job. Will I be able to deduct all of my moving expenses?
- A:
How far you moved and the amount of time you spend on the job will have a major impact on whether you qualify for the tax break. Moves that are only short hops and jobs that are short-term or part-time generally do not qualify. However, if you can satisfy the distance and time tests then job-related moving expenses that you incur may be tax deductible.
You will meet the distance test if your new workplace is at least 50 miles further from your former home than your previous workplace was from that home. For example, if your old job was 5 miles from your former home, your new job must be at least 55 miles from that home.
The time test requires you work full-time for at least 39 weeks during the 12 months immediately after your move. If you are self-employed, the time test requires you to work full-time for at least 39 weeks during the first 12 months and for a total of at least 78 weeks during the first 24 months after your move. You can deduct your moving expenses on your tax return even though you have not met the time test by the date your return is due if you expect to meet the 39-week or the 78-week test as required.
Members of the armed forces do not have to meet these tests if the move was due to a permanent change of station.
Reasonable moving expenses are deductible and include the costs of moving your household goods and personal effects to your new home. You can also deduct the expenses of traveling to your new home, including lodging costs.
Meals eaten while in transit between your old and new homes are not deductible as moving expenses. No part of the purchase price of your new home may be deducted as a moving expense. You cannot claim a moving expense deduction for expenses covered by reimbursements excluded from income
Additional information on moving expenses, including an extensive list of deductible and non-deductible expenses, can be found in Publication 521, Moving Expenses
Q: I took out a home equity loan to pay off personal debts. Is this interest deductible? Where do I enter this amount on my tax return?
- A:
A loan taken out for reasons other than to buy, build, or substantially improve your home, such as to pay off personal debts may qualify as home equity debt:
- The amount you can deduct as interest on home equity debt is subject to certain limitations.
- The interest would be deducted on Form 1040, Schedule A (PDF), Itemized Deductions.
Refer to Publication 936, Home Mortgage Interest Deduction for more information
Q: I will be homeschooling my child next year. What is deductible?
- A:
Qualified expenses do not include expenses for home schooling or for nonathletic supplies for courses in health or physical education. You must reduce your qualified expenses by the following amounts.
- Excludable U.S. series EE and I savings bond interest from Form 8815.
- Nontaxable qualified state tuition program earnings.
- Nontaxable earnings from Coverdell education savings accounts.
- Any reimbursements you received for these expenses that were not reported to you on your Form W-2, box 1.
Please refer to Publication 529, Miscellaneous Deductions.
Q: Is personal credit card interest tax-deductible?
- A:
You cannot deduct personal interest. Personal interest includes interest paid on a loan to purchase a car for personal use. Personal interest also includes credit card and installment interest incurred for personal expenses. Items you cannot deduct as interest include points (if you are a seller), service charges, credit investigation fees, and interest relating to tax-exempt income, such as interest to purchase or carry tax-exempt securities.
Q: Is the interest that we paid to the IRS deductible?
- A:
Interest and penalties paid to the IRS on Federal taxes are not deductible.
Refer to Items You Cannot Deduct in Chapter 25 of IRS Publication 17, Your Federal Income Tax for Individuals.
Q: Is the mortgage interest and property tax on a second residence deductible?
Q: My spouse and I are filing separate returns. How can we split our itemized deductions?
- A:
If you and your spouse file separate returns and one of you itemizes deductions, the other spouse will have a standard deduction of zero. Therefore, the other spouse should also itemize deductions.
- You may be able to claim itemized deductions on a separate return for certain expenses that you paid separately or jointly with your spouse.
- Deductible expenses that are paid out of separate funds, such as medical expenses, are deductible by the spouse who pays them. If these expenses are paid from community funds, the deduction may depend on whether or not you live in a community property state.
- In a community property state, the deduction is divided equally between you and your spouse.
Refer to Publication 504, Divorced or Separated Individuals
Refer to Publication 555, Community Property
Q: Our home was seriously damaged by flooding last year. Are there special provisions for claiming a loss since our home is located in a declared disaster area?
Q: Should I itemize?
- A:
"You should itemize deductions if your total deductions are more than the standard deduction amount. Also, if your standard deduction is zero, you should itemize any deductions you have if:
- You are married and filing a separate return, and your spouse itemizes deductions,
- You are filing a tax return for a short tax year because of a change in your annual accounting period, or
- You are a nonresident or dual-status alien during the year. You are considered a dual-status alien if you were both a nonresident and resident alien during the year.
NOTE: If you are a nonresident alien who is married to a U.S. citizen or resident at the end of the year, you can choose to be treated as a U.S. resident. (See Publication 519, U.S. Tax Guide for Aliens.) If you make this choice, you can take the standard deduction.
When to itemize
You may benefit from itemizing your deductions on Schedule A (Form 1040) if you:
- Do not qualify for the standard deduction, or the amount you can claim is limited,
- Had large uninsured medical and dental expenses during the year,
- Paid interest and taxes on your home,
- Had large unreimbursed employee business expenses or other miscellaneous deductions,
- Had large uninsured casualty or theft losses,
- Made large contributions to qualified charities, or
- Have total itemized deductions that are more than the standard deduction to which you otherwise are entitled.
Q: What are the limits for deducting interest paid on a student loan?
- A:
The maximum deductible interest on a qualified student loan is $2,500 per return.
There are no deduction if:
- You file as married filing separately,
- You are claimed as a dependent, or
- If the loan is from a related party or a qualified employer plan.
- There are limits based on your filing status and adjusted gross income.
For more information, refer to Publication 970, Tax Benefits for Education
For work related education expenses, refer to Tax Topic 513, Educational Expenses
Q: What types of educational expenses are deductible?
- A:
Deductible educational expenses include:
- Amounts spent for tuition, books, supplies, laboratory fees and similar items
- They also include the cost of correspondence courses, as well as formal training and research you do as part of an educational program
- Transportation and travel expenses to attend qualified educational activities may also be deductible
For more information, refer to Publication 970, Tax Benefits for Education; Chapter 12.
For work related education expenses, refer to Tax Topic 513, Educational Expenses.
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