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About deductions
All taxpayers qualify for deductions in one form or another, either standard deductions or itemized deductions. Before deciding which one to use, figure out your taxes both ways.
Charitable deductions
According to the IRS, there are five types of organizations that are qualified to receive deductible contributions. The first is a community chest, corporation, fund, or foundation.
Deductions for auto expenses
If you own or lease your car and use it for business, you have the choice of either deducting the actual operating costs, such as gas, repairs, license tags, and depreciation, or you can take the flat IRS allowance.
Deductions for educational expenses
In order to deduct education costs, the IRS requires the following three conditions be met: First, you have to be employed or self-employed. Second, you must meet the minimum educational requirements of your job, business, or profession.
Deductions for entertainment and travel
If you travel or entertain for business reasons and are not reimbursed by an employer, you may be able to deduct some or most of your expenses. The deduction for business meals and entertainment is 50 percent of the amount you spend.
Deductions for job expenses
You may deduct expenses that are necessary to earn your salary. Typical expenses are those incurred traveling to see customers or clients, food and lodging on business trips, as well as cost for entertaining business customers, work clothes, and union and business association dues.
Home sale exclusions
If you sold your home, $250,000 can be excluded from federal income taxes. If filing a joint return, the amount is $500,000, in most cases. In order to take this type of deduction, you must have owned the home and used it as your main home for at least two years out of the five years prior to selling or exchanging it.
How to claim exemptions
Each exemption you claim on your 2007 return reduces your taxable income by $3,400. According to the IRS, you will lose all or part of the benefit of your exemptions if your adjusted gross income is above a certain amount.
Interest expense deductions
Though you can no longer deduct interest payments on consumer loans for such purchases as cars and credit card balances, there are still tax breaks available if you're paying a home mortgage or a student loan.
Medical and dental expense deductions
To alleviate the high cost of health care, you can take advantage of tax breaks allowed by the IRS for medical and dental expenses. To qualify, your medical and dental expenses for the year must be higher than the '7.
Moving expense deductions
You can deduct moving expenses when the distance between your new job and your former home is at least 50 miles more than the distance between your old job and your former home.
Other deductions
What the IRS calls miscellaneous deductions includes work uniforms, job-hunting trips, employment agency fees you pay yourself, union dues, and job-related magazine subscriptions.
State and local tax deductions
You are permitted under federal tax laws to claim the amount you pay for state and local income taxes as deductions. However, sales tax imposed on state and local levels are not considered eligible deductions on your federal tax form.
Theft or casualty loss deductions
If your property is destroyed, damaged, or stolen, you may be able to claim a theft or casualty loss deduction on your tax form. When filing for this type of deduction, accurate record-keeping is a must.
What is depreciation?
If you're self-employed, you can claim depreciation, an expense deduction that allows you, over a period of years, to charge off your capital investments in equipment, machines, fixtures, vehicles, buildings, as well as certain intangible property like copyrights, patents, and computer software.


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