Many clients ask me what they can deduct, so I am providing the following lists of possible deductions.  The lists are only meant to give you ideas, or steer you in the right direction.  They are not all-inclusive and not all items are deductible all the time.  Many are subject to limitations, may only apply in certain situations, or are governed by other rules.  Please keep careful records and save your receipts for at least 3 years in case of audit.

Individuals/Families
Landlords
Self Employed

Individuals/Families
Unemployed: You can exclude up to $2,400 of your unemployment benefits from taxable income!

Employed: Making Work Pay Tax Credit- The credit is 6.2% of earned income, or a maximum of $800 for a married couple filing jointly, and $400 for other taxpayers. The credit is refundable, so even taxpayers who owe no tax are eligible for the credit. The credit will automatically appear in your paycheck, but you will need to claim the credit on the 2009 tax return you file next year.

2009 Tax Breaks for ALL
 New Car Purchases in 2009: If you buy a new vehicle before the end of 2009, you may be able to deduct the amount of sales tax paid on up to $49,500 of the vehicle's full cost. You can take advantage of this special deduction even if you don't itemize by adding the value of the deduction to your standard deduction. To qualify for this deduction, the new vehicle must be purchased between February 16, 2009 and January 1, 2010. This deduction is not eligible for your 2008 tax return and does not apply for leased or used cars.The deduction is limited to the state and local sales and excise taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home, or motorcycle.

First Time Home Buyer AND Current Homeowner Tax Credit:  If you plan to buy your first home—or if you’ve already bought it—in 2009 (or 2010), you should know about and begin to plan for the First-Time Homebuyer Tax Credit. Even if you already know about the credit, you might not be aware of changes made to it by President Obama’s American Recovery and Reinvestment Act of 2009, or the increased benefits introduced by the new Worker, Homeownership and Business Assistance Act of 2009:

Unlike the 2008 first-time homebuyer credit, this credit need not be repaid as long you own your house for at least three years and it remains your primary residence during that time.
The First-Time Homebuyer Credit will now allow taxpayers a credit of up to $8,000.
The full amount of the credit is refundable, which means that you will see it in your tax refund if you owed the IRS less than the amount of the credit.

Claiming this credit does not necessarily disqualify you from claiming another homebuyer credit (for example, a state Federal Housing Administration loan). You may be able to claim multiple such credits on your home purchase.

Referenced: http://www.efile.com/tax-deduction/

Miscellaneous Schedule A Expenses
• Real estate expenses:
     Mortgage interest
     Mortgage prepayment penalties
     Penalties of early withdrawals
     Points on principal residence financing
     Real estate taxes
• Auto registration fees
• Charitable contributions (cash and non-cash) made to qualified U.S. charities. 
• Investment expenses:
     Accounting fees (preparation of tax return)
     Brokerage fees
     Investment fees
     Legal fees
     Safe deposit box rental
     Interest on margin accounts
• Taxes
    Ad valorem tax
    Certain special assessments
    Condo or coop maintenance (property tax portion)
    Disability insurance tax (some states)
    Foreign taxes
    Income tax (state and local)
    Occupational taxes
    Personal property tax
    Real property tax
    State transfer tax
    Withholding taxes
• Casualty and theft Losses 
 
Qualified Medical Expenses
Generally, you can only deduct the excess over 7.5% of Adjusted Gross Income, and then only if you can itemize on Schedule A.  This means that if you make $100,000, you can only deduct the amount of medical expenses you spent over $7,500.   Please also refer to IRS Publication 502:  Medical Expenses.
 
• Acupuncture
• Air conditioner necessary for relief from allergies or other respiratory problems
• Alcoholism treatment
• Analysis
• Artificial limbs
• Artificial teeth
• Birth control pills prescribed by a doctor
• Braille books and magazines used by a visually-impaired person
• A clarinet and lessons to treat the improper alignment of a child’s upper and lower teeth
• Contact lenses
• Cosmetic surgery to improve a deformity
• Dental fees and supplies
• Diet, special. When prescribed by a doctor, you can deduct the extra cost of purchasing special food to alleviate a specific medical condition.
• Doctor or physician expenses
• Drug addiction treatment
• Elastic hosiery to treat blood circulation problems
• Exercise program if recommended by doctor to treat a specific condition
• Extra rent/utilities for a larger apartment required in order to provide space for a nurse/attendant
• Eye surgery, when it is not for cosmetic purposes only
• Fertility treatment:  Limited to procedures such as in vitro fertilization (including temporary storage of eggs or sperm) and surgery, including an operation to reverse prior surgery that prevented the person operated on from having children.
• Guide dog
• Hospital care
• Household help for nursing care services only
• Insurance premiums for medical care coverage
• Laboratory fees
• Lead-based paint removal where a child has or had lead poisoning
• Legal fees paid to authorize treatment for mental illness
• Lifetime care advance payments
• Lodging expenses while away from home to receive medical care in a hospital or medical facility
• Long-term care insurance and long term care expenses (with limitations)
• Mattresses and boards bought specifically to alleviate an arthritic condition
• Medical aids. This includes wheelchairs, hearing aids and batteries, eyeglasses, contact lenses, crutches, braces, and guide dogs (including costs paid for their care).
• Medical conference admission costs and travel expenses for a chronically ill person or a parent of a chronically ill child to learn about new medical treatments.
• Medicines and prescription drugs
• Nursing care.
• Nursing home expenses if the there to obtain medical care.
• Oxygen and oxygen equipment.
• Reclining chair bought on a doctor’s advice by a person with a cardiac condition.
• Special education tuition of mentally impaired or physically disabled person.
• Smoking cessation programs.
• Swimming costs, if therapeutic and prescribed by a physician.
• Telephone cost, repair and equipment for a hearing-impaired person.
• Television equipment to display the audio part of a TV program for hearing-impaired persons.
• Transplants of an organ, but not hair transplants.
• Transportation costs for obtaining medical care.
• Travel expenses for parents visiting their child in a special school for children with drug problems, where the visits are part of the medical treatment.
• Weight loss program, if it is recommended by a doctor to treat a specific medical condition or to cure any specific ailment or disease
• Whirlpool baths prescribed by a doctor.
• Wig for the mental health of a patient who lost his or her hair due to a disease.
• X-ray services.

Expenses You Cannot Deduct
People commonly hope to deduct some of the following expenses, but unfortunately they are not deductible.

Non-Deductible Expenses:
• Expenses that were reimbursed by your employer.
• Apartment Rent, unless qualified to claim away from home expenses for a business trip expected to last one year or less (Temporary Living Expenses), or if a portion is used as a home office (special rules apply to both cases).  Also, may be deductible if maintained for the sole purpose of going to school if your education expenses qualify for the business deduction. • Clothing that is adaptable to everyday wear (this includes suits, evening wear, etc.). 
• Commuting costs (subways and rail fares, and vehicle use including tolls, gasoline, and parking).  Exception if qualified as being away from home on business or as part of Temporary Living Expenses.
• Dues to country clubs, golf and athletic clubs, and airline and hotel clubs.
• Home phone line
• Job hunting expenses if you’re looking for your first job, or changing professions.
• Dry cleaning and laundry (unless you’re on a business trip)
• Legal fees and closing costs involved in purchasing a property
• Fees for taking an exam to qualify you in a profession (e.g., Bar Exam, GRE, etc.)
• Immigration visa expenses, such as for obtaining a Green Card or H-1B visa.
• Moving expenses that were not associated with your job and were less than 50 miles.
• Moving expenses if you are claiming temporary living expenses.
• Meals, unless for business meetings, or while away from home on business.  Also, allowable as part of Temporary Living Expenses.
• Lunch on the job.
• Personal expenses, such as grooming and maintenance (gym membership) unless they are directly related to your business (e.g.,  models, actors).
• Any other personal expenses for which there is no provision for a deduction in the Tax Code.
• Interest on personal loans.
• Support of family members, unless they qualify as your dependents.
• Personal vacations.
• Cosmetic surgery to improve personal appearance
• Contributions made to individuals or foreign charities.
• Student loan interest if adjusted gross income is greater than $65,000 (single) or $130,000 (married).
• Student loan principal.

Landlords

Top 10 Tax Deductions for Landlords

1. Interest:  Interest is often a landlord's single biggest deductible expense. Common examples of interest that landlords can deduct include mortgage interest payments on loans used to acquire or improve rental property and interest on credit cards for goods or services used in a rental activity.

2. Depreciation:  The actual cost of a house, apartment building, or other rental property is not fully deductible in the year in which you pay for it. Instead, landlords get back the cost of real estate through depreciation. This involves deducting a portion of the cost of the property over several years.

3. Repairs: The cost of repairs to rental property (provided the repairs are ordinary, necessary, and reasonable in amount) are fully deductible in the year in which they are incurred. Good examples of deductible repairs include repainting, fixing gutters or floors, fixing leaks, plastering, and replacing broken windows.

4. Local Travel: Landlords are entitled to a tax deduction whenever they drive anywhere for their rental activity. For example, when you drive to your rental building to deal with a tenant complaint or go to the hardware store to purchase a part for a repair, you can deduct your travel expenses.

If you drive a car, SUV, van, pickup, or panel truck for your rental activity (as most landlords do), you have two options for deducting your vehicle expenses.

You can:  deduct your actual expenses (gasoline, upkeep, repairs), or use the standard mileage rate (55 cents per mile for 2009; 58.5 cents per mile for July 1, 2008 through December 31, 2008 and 50.5 cents per mile from January 1, 2008 through June 30, 2008). To qualify for the standard mileage rate, you must use the standard mileage method the first year you use a car for your business activity. Moreover, you can't use the standard mileage rate if you have claimed accelerated depreciation deductions in prior years, or have taken a Section 179 deduction for the vehicle.

5. Long Distance Travel: If you travel overnight for your rental activity, you can deduct your airfare, hotel bills, meals, and other expenses. If you plan your trip carefully, you can even mix landlord business with pleasure and still take a deduction.

However, IRS auditors closely scrutinize deductions for overnight travel -- and many taxpayers get caught claiming these deductions without proper records to back them up. To stay within the law (and avoid unwanted attention from the IRS), you need to properly document your long distance travel expenses.

6. Home Office: Provided they meet certain minimal requirements, landlords may deduct their home office expenses from their taxable income. This deduction applies not only to space devoted to office work, but also to a workshop or any other home workspace you use for your rental business. This is true whether you own your home or apartment or are a renter.

For the ins and outs on taking the home office deduction, call us at 513.335.6717 to schedule a Tax Planning Meeting

7. Employees and Independent Contractors: Whenever you hire anyone to perform services for your rental activity, you can deduct their wages as a rental business expense. This is so whether the worker is an employee (for example, a resident manager) or an independent contractor (for example, a repair person).

8. Casualty and Theft Losses: If your rental property is damaged or destroyed from a sudden event like a fire or flood, you may be able to obtain a tax deduction for all or part of your loss. These types of losses are called casualty losses. You usually won't be able to deduct the entire cost of property damaged or destroyed by a casualty. How much you may deduct depends on how much of your property was destroyed and whether the loss was covered by insurance.

9. Insurance:  You can deduct the premiums you pay for almost any insurance for your rental activity. This includes fire, theft, and flood insurance for rental property, as well as landlord liability insurance. And if you have employees, you can deduct the cost of their health and workers' compensation insurance.

10. Legal and Professional Services:  Finally, you can deduct fees that you pay to attorneys, accountants, property management companies, real estate investment advisors, and other professionals. You can deduct these fees as operating expenses as long as the fees are paid for work related to your rental activity.

Did you know that:

• Landlords can greatly increase the depreciation deductions they receive the first few years they own rental property by using segmented depreciation.
  
• Careful planning can permit you to deduct, in a single year, the cost of improvements to rental property that you would otherwise have to deduct over 27.5 years.
  
• You can rent out a vacation home tax-free, in some cases.
  
• Most small landlords can deduct up to $25,000 in rental property losses each year.
  
• A special tax rule permits some landlords to deduct 100% of their rental property losses every year, no matter how much.
  
• People who rent property to their family or friends can lose virtually all of their tax deductions.

 If you didn't know one or more of these facts, you could be paying far more tax than you need to.

 Referenced:  Steven Fishman, J.D.

Self Employed
  A lot of times self employed individuals cheat themselves by writing off too little and not taking full advantage of the IRS rules and regualtions allowed to them.  Below we have identified a few key common areas in which the self employed can lower their tax liability.  Please note that this list is not all-inclusinve and that most of the deductions are taken on Schedule C unless otherwise noted. 

Internet Access. Both at home and in coffee shops in which you pay for WI-FI access. 

Website Expenses. Fees paid to purchase domains, hosting, and other fees associated with running a website. 

Cell Phone. You cannot deduct the primary phone line at your house, but if you have multiple lines or a cell phone you use for business, the extra lines are deductible.

Contract Labor. Independent contractor’s that you hire to complete work are not employees, but the payments can be deducted.

Computer. If  you bought a new business laptop on December 31, you can either depreciate the cost over multiple years or deduct it all at once using section 179.

Advertising. Advertising costs are deductible.

Prizes for Giveaways. If you purchase the prizes, you can deduct the cost.

Tax and Accounting Software. Software you buy to keep the books for your business is deductible.

Filing Fees. You can deduct fees you pay to the state to maintain your business license.

Postage and P.O. Box Fees. Don’t want your business mail going to your home address? Set up a P.O. Box and deduct the cost.

Professional Fees.  You can deduct the cost of your Accountant, Attorney, etc.

Office Supplies. In addition to postage, you can deduct the cost of paper, pens, etc.

Mileage. You can deduct business mileage on your personal car. Make sure you keep good records. 2009 deduction is .55 cents per mile.

Business meals. Business meals are deductible at a rate of 50%.  Keep good record of where you went, who you went with, and what buisness was discussed.

Retirement Contributions. Contributions to a 401K or other qualified plan are deductible.

Self Employment Tax. Half of the self employment tax you pay can be deducted on your 1040.