Tax Breaks

Other Deductions

These tax savers don't fall logically under any of our other Taxopedia categories.

These tax savers don't fall logically under any of our other Taxopedia categories. But they can still save you money.

See our other taxopedias.

What's Deductible? -- A to Z

Alimony. You may deduct the alimony or separate maintenance payments you are required to make to your spouse or former spouse, or to a third party on behalf of that spouse. You do not have to itemize deductions to claim this tax saver. Child support is not deductible.

Elderly and disabled credit. You may be able to take the Credit for the Elderly or the Disabled if you were age 65 or older at the end of the year, or if you are retired on permanent and total disability. Only low-income filers can claim the credit.

Estate tax imposed on an IRA, retirement plan or annuity. If you inherited an IRA or other retirement plan that was subject to the federal estate tax in the original owner’s estate, you deserve a tax deduction that will offset part of the income you report with you withdraw funds from the account. If the value of the IRA added $50,000 to the estate tax, for example, you get to deduct $50,000 as you withdraw and pay tax on the income. Although this is considered a miscellaneous expense, it is not subject to the normal rule that limits deductions for such costs to the amount that exceeds 2% of adjusted gross income.

Gambling losses. You can deduct losses up to the extent of gambling winnings you report as taxable income. You must itemize to use this write-off, but the deduction is not subject the rule that trims miscellaneous expenses by 2% of your adjusted gross income.

Impairment-related work expenses. If you have a physical or mental disability that limits your being employed, or substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning and working, you can deduct your impairment-related work expenses.

Legal fees. Legal fees related to producing or collecting taxable income or getting tax advice are a miscellaneous itemized deduction on Schedule A allowable to the extent that this deduction and your other miscellaneous deductions exceed 2% of your adjusted gross income.

Making work pay credit. As part of the 2009 economic stimulus plan, Congress enacted the making work pay credit. Most workers received the benefit via reduced withholding on wages during 2009 and 2010. However, you must claim the 2010 credit ($400 for singles/$800 for married couples) on your 2010 tax return to bring your tax bill down in line with the reduced withholding. The credit is phased out for those with income over $75,000 ($150,000 on joint returns filed by married couples).

Tax preparation fees. You can deduct tax preparation fees -- including the cost of tax software -- in the year you pay them. The deduction is treated as a miscellaneous itemized deduction on Schedule A that is allowable to the extent that it and your other miscellaneous deductions exceed 2% of your adjusted gross income.

Unrecovered investment in pension plan or annuity. If you die before your entire investment is recovered tax free, any unrecovered amount is allowed as an itemized deduction on your final income tax return.

Unemployment compensation. Generally, jobless pay you receive is fully taxable. A break that allowed up to $2,400 to be tax-free in 2009 was not renewed for 2010.

See our other taxopedias.

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