OLT TAX CORNER ~ Itemized Deductions

OLT TAX CORNER ~ Itemized Deductions

OLT TAX CORNER ~ Itemized Deductions



OLT TAX CORNER ~ Itemized Deductions

Itemized Deductions FAQ
  1. I had a question on whether it would be beneficial to itemize my deductions or go the standard route?
  2. Are the closing costs I paid deductible?
  3. How do I know what points are?
  4. Can I deduct all the points I paid?
  5. What about refinancing points?
  6. Is the mortgage interest and property tax on a second residence deductible?
  7. I am a co-owner in a residential home (we both live there). We are not married. Can we split the mortgage interest?
  8. We donated our vehicle to the Alzheimer's Assoc and our donation is tax deductible. Where do we indicate the blue book value of the vehicle which we donated on our tax return?
  9. Can I itemize deductions if I am filing married filing separately if my spouse is not itemizing?
  10. Where can I find the Optional State Sales Tax Tables?
  11. Can I get a credit for my gambling losses on my Federal return?
  12. Can I claim tithes and offering on my taxes?
  13. Where do I include my charitable contributions?
  14. Can I include insurance premiums as medical expenses when itemizing my deductions?
  15. Can I deduct personal property taxes I paid?
  16. How much do my medical expenses have to be before I can deduct them?
  17. Is the loss on the sale of your home deductible?


I had a question on whether it would be beneficial to itemize my deductions or go the standard route?
Whether or not to itemize your deductions depends on the amount you are able to itemize. If your itemized deductions total more than the standard deduction, then it would be in your best interest to itemize your deductions. However, if your itemized deductions add up to less than the standard deduction, then it would benefit you to take the standard deduction. The OLT program will use your information and give you the best deduction.
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Are the closing costs I paid deductible?
The only settlement or closing costs you can deduct are home mortgage interest and certain real estate taxes. You deduct them in the year you buy your home if you itemize your deductions. You can add certain other settlement or closing costs to the basis of your home.
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How do I know what points are?
The term "points" is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points.
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Can I deduct all the points I paid?
You can fully deduct points in the year paid if you meet all the following tests:
  • Your loan is secured by your main home. (Your main home is the one you ordinarily live in most of the time.)
  • Paying points is an established business practice in the area where the loan was made.
  • The points paid were not more than the points generally charged in that area.
  • You use the cash method of accounting. This means you report income in the year you receive it and deduct expenses in the year you pay them. Most individuals use this method.
  • The points were not paid in place of amounts that ordinarily are stated separately on the settlement statement, such as appraisal fees, inspection fees, title fees, attorney fees, and property taxes.
  • The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. The funds you provided do not have to have been applied to the points. They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. You cannot have borrowed these funds from your lender or mortgage broker.
  • You use your loan to buy or build your main home.
  • The points were computed as a percentage of the principal amount of the mortgage.
  • The amount is clearly shown on the settlement statement (such as the Uniform Settlement Statement, Form HUD-1) as points charged for the mortgage. The points may be shown as paid from either your funds or the seller's.
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What about refinancing points?
Generally, points you pay to refinance a mortgage are not deductible in full in the year you pay them. This is true even if the new mortgage is secured by your main home. However, if you use part of the refinanced mortgage proceeds to improve your main home and you meet the first 6 tests above, you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. You can deduct the rest of the points over the life of the loan.
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Is the mortgage interest and property tax on a second residence deductible?
The mortgage interest on a second home which you use as a residence for some portion of the taxable year is generally deductible if the interest satisfies the same requirements for deductibility as interest on a primary residence. Real estate taxes paid on your primary and second residence are, generally, deductible. Deductible real estate taxes include any state or local taxes on real property levied for the general public welfare. Deductible real estate taxes do not include taxes charged for local benefits and improvements that increase the value of the property. For more information, refer to IRS Publication 17, Your Federal Income Tax for Individuals; IRS Tax Topic 503, Deductible Taxes; and IRS Publication 530, Tax Information for First-Time Home Owners.
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I am a co-owner in a residential home (we both live there). We are not married. Can we split the mortgage interest?
If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on a mortgage that was for your home, and the other person received a Form 1098 showing the interest that was paid during the year, attach a statement to your return explaining this. Show how much of the interest each of you paid, and give the name and address of the person who received the form. Deduct your share of the interest on Schedule A (Form 1040).
Similarly, if you are the payer of record on a mortgage on which there are other borrowers entitled to a deduction for the interest shown on the Form 1098 you received, deduct only your share of the interest on Schedule A (Form 1040). You should let each of the other borrowers know his or her share.
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We donated our vehicle to the Alzheimer's Assoc. and our donation is tax deductible. Where do we indicate the blue book value of the vehicle which we donated on our tax return?
The donation of your vehicle to the Alzheimer's Association is considered to be a charitable donation and is recorded on your tax return in the Itemized Deduction section. Please remember, you must have more in itemized deductions than the standard deduction for your filing status in order for the donation to benefit you.
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Can I itemize deductions if I am filing married filing separately if my spouse is not itemizing?
No, when using the married filing separately status, both must either file with itemized deductions or both must use the standard deduction. One spouse is not allowed to itemize if the other is using the standard deduction.
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Where can I find the Optional State Sales Tax Tables?
You can find the Optional State Sales Tax Tables in the Schedule A instructions.
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Can I get a credit for my gambling losses on my Federal return?
You may deduct gambling losses only if you itemize deductions. Claim your gambling losses as a miscellaneous deduction on Schedule A. However, the amount of losses you deduct may not be more than the amount of gambling income you have reported on your return. It is important to keep an accurate diary or similar record of your gambling winnings and losses. To deduct your losses, you must be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses.
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Can I claim tithes and offering on my taxes?
If you itemize deductions, contributions you made to your church are deductible.
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Where do I include my charitable contributions?
To be deductible, charitable contributions must be made to qualified organizations. Qualified organizations include, but are not limited to, Federal, state, and local governments and organizations organized and operated only for charitable, religious, educational, scientific, or literary purposes, or for the prevention of cruelty to children or animals. Organizations can tell you if they are qualified and if donations to them are deductible.
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Can I include insurance premiums as medical expenses when itemizing my deductions?
You can include in medical expenses insurance premiums you pay for policies that cover medical care. Policies can provide payment for:
  • Hospitalization, surgical fees, X-rays, etc.
  • Prescription drugs
  • Replacement of lost or damaged contact lenses
  • Membership in an association that gives cooperative or so-called "free-choice" medical service, or group hospitalization and clinical care
  • Qualified long-term care insurance contracts (subject to additional limitations)
If you have a policy that provides more than one kind of payment, you can include the premiums for the medical care part of the policy if the charge for the medical part is reasonable. The cost of the medical part must be separately stated in the insurance contract or given to you in a separate statement.
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Can I deduct personal property taxes I paid?
Personal property tax is deductible if it is a state or local tax:
  1. Charged on personal property
  2. Based only on the value of the personal property, and
  3. Charged on a yearly basis (even if collected more or less than once a year).

    Automobile license fees: A fee based on weight, model, year or horsepower may not be deducted.
    • Fee based on the value of the car: Deductible, even if the tax is imposed on the exercise of a privilege of registering a car or for using a car on the road.
    • Tax based partly on value and partly on weight or other test: Only the tax attributed to the value is deductible.
    • Example: Assume annual registration fee based on 1% of value, plus $.40 per hundred-weight. The part of the tax equal to 1% of the value is deductible.
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How much do my medical expenses have to be before I can deduct them?
For tax year 2024 you can deduct only the part of your medical and dental expenses that exceed 7.5% of the amount of your adjusted gross income on Form 1040.
You can generally include medical expenses you pay for yourself as well as those you pay for someone who was your spouse or your dependent either when the services were provided or when you paid for them. There are different rules for decedents and for individuals who are the subject of multiple support agreements. For more information on what's deductible, see IRS Publication 502.
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Is the loss on the sale of your home deductible?
No, the loss on the sale of a personal residence is a nondeductible personal loss.
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