It is most commendable, therefore, that the Committee on ging staff has prepared a checklist of itemized deductions d other tax relief provisions for older Americans. The Internal Revenue Service does have a booklet availle, Publication 554, entitled "Tax Benefits for Older Amerans", which can be obtained at IRS offices, and is of great lue to those who make use of it. The shorter, but pointed mmary developed by the Committee on Aging staff is most esirable, however, because it may permit a wider distribuon of this important information. It has been my observation that no group in America has en more responsive to their citizenship duties than persons st 65. This includes their honest and forthright payment of come taxes. I fear they often lean over backwards to be sure Ley meet these tax obligations. This very willingness to meet their responsibilities makes important that we do all we can to see that they do not ay more taxes than the law requires. Every effort should be ade to inform older Americans as fully as possible regarding x relief provisions available to them under the law. CHECKLIST OF ITEMIZED DEDUCTIONS FOR SCHEDULE A (FORM 1040) MEDICAL AND DENTAL EXPENSES Medical and dental expenses are deductible to the extent that they exceed 3% of a taxpayer's adjusted gross income (line 15, Form 1040). INSURANCE PREMIUMS One-half of medical, hospital or health insurance premiums are deductible (up to $150) without regard to the 3% limitation for other medical expenses. The remainder of these premiums can be deducted, but is subject to the 3% rule. DRUGS AND MEDICINES Included in medical expenses (subject to 3% rule) but only to extent exceeding 1% of adjusted gross income (line 15, Form 1040). OTHER MEDICAL EXPENSES Other allowable medical and dental expense (subject to 3 limitation): Abdominal supports Ambulance hire Anesthetist Arch supports Artificial limbs and teeth Braces Capital expenditures for medical purposes (e.g., elevator for persons with a heart ailment)-deductible to the extent that the cost of the capital expenditure exceeds the increase in value to your home because of the capital expenditure. Taxpayer should have an independent appraisal made to reflect clearly the increase in value. If sales tax tables are used in arriving at your deduction, you may add to the amount shown in the tax tables only the sales tax paid on the purchase of five classes of items: automobiles, airplanes, boats, mobile homes, and materials used to build a new home when you are your own contractor. When using the sales tax tables, add to your adjusted gross income any nontaxable income (e.g., Social Security or Railroad Retirement annuities). CONTRIBUTIONS In general, contributions may be deducted up to 50 percent of your adjusted gross income (line 15, Form 1040). However, contributions to certain private nonprofit foundations, veterans organizations, or fraternal societies are limited to 20 Cash contributions to qualified organizations for (1) religious, charitable, scientific, literary or educational purposes, (2) prevention of cruelty to children or animals, or; (3) Federal, State or local governmental units (tuition for children attending parochial schools is not deductible). Fair market value of property (e.g., clothing, books, equipment, furniture) for charitable purposes. (For gifts of appreciated property, special rules apply. Contact local IRS office. Travel expenses (actual or 6¢ per mile plus parking and tolls) for charitable purposes (may not deduct insurance or depreciation in either case). Cost and upkeep of uniforms used in charitable activities (e.g., scoutmaster). Purchase of goods or tickets from charitable organizations (excess of amount paid over the fair market value of the goods or services). Out-of-pocket expenses (e.g., postage, stationery, phone calls) while rendering services for charitable organizations. Care of unrelated student in taxpayer's home under a written agreement with a qualifying organization (deduction is limited to $50 per month). Home mortgage. Auto loan. INTEREST Installment purchases (television, washer, dryer, etc.) Bank credit card-can deduct the finance charge as interest if no part is for service charges or loan fees, credit investigation reports. If classified as service charge, may still deduct 6 percent of the average monthly balance (average monthly balance equals the total of the unpaid balances for all 12 months, divided by 12) limited to the portion of the total fee or service charge allocable to the year. Points-deductible as interest by buyer where financing agreement provides that they are to be paid for use of lender's money. Not deductible if points represent charges for services rendered by the lending institution (e.g., VA loan points are service charges and are not deductible as interest). Not deductible if paid by seller (are treated as selling expenses and represent a reduction of amount realized). Penalty for prepayment of a mortgage-deductible as interest. Revolving charge accounts-may deduct the "finance charge" if the charges are based on your unpaid balance and CASUALTY OR THEFT LOSSES Casualty (e.g., tornado, flood, storm, fire, or auto accident ovided not caused by a willful act or willful negligence) or eft losses to nonbusiness property-the amount of your sualty loss deduction is generally the lesser of (1) the crease in fair market value of the property as a result of the sualty, or (2) your adjusted basis in the property. This nount must be further reduced by any insurance or other covery, and, in the case of property held for personal use, the $100 limitation. You may use Form 4684 for computing our personal casualty loss. CHILD AND DISABLED DEPENDENT CARE EXPENSES The deduction for child dependent care expenses for mployment related purposes has been expanded substanally. Now a taxpayer who maintains a household may claim deduction for employment-related expenses incurred in taining care for a (1) dependent who is under 15, (2) hysically or mentally disabled dependent, or (3) disabled pouse. The maximum allowable deduction is $400 a month $4,800 a year). As a general rule, employment-related xpenses are deductible only if incurred for services for a ualifying individual in the taxpayer's household. However, n exception exists for child care expenses (as distinguished rom a disabled dependent or a disabled spouse). In this ase, expenses outside the household (e.g., day care exenditures) are deductible, but the maximum deduction is 200 per month for one child, $300 per month for 2 children, nd $400 per month for 3 or more children. When a taxpayer's adjusted gross income (line 15, Form 040) exceeds $18,000, his deduction is reduced by $1 for each $2 of income above this amount. For further information about child and dependent care deductions, see Publication 503, Child Care and Disabled Dependent Care, available ree at Internal Revenue offices. MISCELLANEOUS Alimony and separate maintenance (periodic payments). Appraisal fees for casualty loss or to determine the fair market value of charitable contributions. Campaign contributions (up to $100 for joint returns and $50 for single persons). Union dues. |