25 OVERLOOKED

TAX DEDUCTIONS

By Greg Rosica, Ernst & Young

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any of the events that happen in your life, You move me: If
both to you and your family,are events that you meet certain
will have some type of impact on your requirements, you
taxes. Therefore, keeping up with the new tax laws also may be able to
can make filing your tax return much easier and help deduct the cost of
ensure you don't miss out on certain deductions. packing, crating and
Two key areas of particular interest for making transporting your household goods and per-
sure that you take advantage of all family-related sonal items to your new home, as well as the
tax breaks involve life changes and determining cost of disconnecting and connecting utilities
just whom you can claim as a dependent. and shipping your car or household pets.
Married filing jointly: Remember, your tax status Once you have established your new situ-
for the entire year is determined by your marital status ation, take a look at your dependents. Your
on Dec. 31 of that year. For 2008, that's Dec. 31, 2008. loved ones may depend on you for support
In a family way: You can deduct a number of and advice, but do they meet the dependency
medical expenses as they pertain to the expansion, test? Following is an overview of dependents'
or even delay, of your family. Deductions include qualifications and the ensuing tax implica-
fees paid for childbirth preparation classes, certain tions for the 2008-filing year.
fertility enhancement procedures, birth control pills Consider the definition of a "qualifying"
and/or legal operations to prevent having children. child dependent:
What's in a name? Spouses who change their last ◆ A son, daughter, stepchild, eligible foster
name should notify the Social Security child, sibling or their descendent that resides with
Administration as soon as possible.Whether you are you for more than six months a year.
a bride changing to your husband's last name or you
◆ The child must be under age 19 or a full-time
are in a same-sex partnership, failure to report name
student under age 24. Age is not a consideration
changes could lead to complications at tax time.
for a permanently disabled child.
After the love is gone:If your divorce is officially rec- ◆ The child does not provide more than half of
ognized as effective on or before Dec. 31, then you are his or her own financial support for the year.
considered divorced for the entire year, which may
enable you to claim certain benefits associated with fil- If not a qualifying child, a dependent could
ing as single or as a head-of-household, if you qualify. also be a qualifying relative, regardless of age.
The notable differences are:
Filing separate returns: Even though filing a
joint return might make a couple feel even closer, it ◆ The person does not have to live in your
may not be your best option from a tax perspective. household if he or she is an approved relative
For example, if one spouse has large medical such as a parent or sibling.
expenses or employee business expenses but lower
◆ The person's gross income must be
income than the other, filing separate returns may
less than $3,500 for the year, and you must
result in a lower overall tax liability. Run the num-
provide over half of his or her overall
bers both ways to determine which is better.
financial support.

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 The amount you can deduct for each qualifying 7. Employee contributions to a state disability fund
dependent in 2008 is $3,500. High-income tax-
payers may see their deduction trimmed, depend- 8. Impairment-related work expenses for a dis-
ing on their income and filing status. abled individual
Don't forget to include what you paid for your 9. Job hunting costs, including fees for résumé prepa-
dependents' medical and dental costs to deter- ration and employment of outplacement agencies
mine whether you hit the threshold of 7.5% of
adjusted gross income for claiming medical 10. Work-related cellphones, subscriptions to
expenses. You might be entitled to a break from professional journals, trade or business tools and
those growing college bills by receiving up to a laundry services while traveling
$4,000 adjustment to your gross income for their
tuition and related expenses. 11. Long-term care insurance premiums and
health insurance premiums if self-employed
Tax laws can be complicated, so you should
consult the IRS Web site or your tax adviser for
more information. In the meantime, here are 25
often overlooked tax deductions to keep in
mind when as you do your taxes this year.
1. Casualty, theft or embezzlement losses
2. Charitable donations: appraisal fees, apprecia-
tion on property donated and out-of-pocket 12. Contact lenses, eyeglasses and hearing devices
expenses relating to charitable activities plus contraceptives, if bought with a prescription

3. Gambling losses to the extent of gambling winnings 13. Alcoholism and drug abuse treatment
14. Hospital services fees (laboratory work, ther-
apy, nursing services and surgery)
15. Fees paid for childbirth preparation classes
and foster child care expenditures
16. Medical services: medical transportation and
lodging; special schools and separately stated fees
for medical care included in tuition; special
equipment for the disabled
17. Investment advisory fees including IRA
4. Fees: legal expenses incurred in connection with trustee's administrative fees billed separately
alimony; accounting fees for tax prep or audits
18. Margin account interest expense; also, penalty
5. Fifty percent of self-employment tax on early withdrawal of savings
6. Employee Expenses: Protective clothing, mov- 19. Amortization of premium on taxable bonds
ing, union dues and educational expenses

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20. Fees for a safe-deposit box to hold investments 25. Mortgage prepayment penalties and late fees
21. Worthless stock or securities
22. Taxes paid: federal estate tax on income;
foreign taxes; state personal property taxes on
cars and boats

23. Housing: commissions and closing costs; points on

a home mortgage and certain refinancing; real estate
taxes; seller-paid points on the purchase of a home.

24. Improvements to your home including lead

paint removal

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