Forgotten tax deductions that can cost you

/ Source: CNBC

Many of us are too busy to do our own taxes — that’s why we get someone else to do it. But if you don’t pay attention to the information you are providing to your accountant, there’s a good chance you may forget items that could save you money.

Here are some of the tax deductions that are most often overlooked:

  • Investment management fees: They’re normally subject to the floor of 2 percent of your adjusted gross income for miscellaneous itemized deductions. But find out if a portion of these investment expenses are transaction costs, as then they’re deductible as part of your cost basis in calculating your investment gain or loss.
  • Refinancing costs: If you refinanced your home at a lower rate, any points paid can be deducted; amortized over the life of the loan.
  • Casualty losses: Was your vacation home damaged by hurricanes Katrina, Rita or Wilma? A new provision makes casualty losses fully deducible in FEMA disaster areas.

And there’s more: Do you fall into the dreaded “AMT” zone? If so, remember you can’t write off “below the line deductions” — miscellaneous itemized deductions like investment fees and unreimbursed business expenses — when figuring out alternative minimum tax. So reduce your income right off the top by finding as many “above the line” deductions as possible.

And keep this in mind: State income tax laws are often very different from the federal tax code. So even if you get a break from Uncle Sam, don’t be surprised if you end up paying money to your state.