The tax deductions that are available to the average taxpayer have shifted over the years. What was available a few years ago may not be available today and what is available today may shift in the coming years.
For taxpayers who itemize deductions, you can deduct the medical expenses you paid for yourself, your spouse or your dependents to the extent that they exceed 7.5% of your 2019 adjusted gross income (AGI).
For example – if you and your spouse’s combined income was $110,000 last year and you contributed $10,000 to your IRA, your AGI would be $100,000. You could deduct any medical expenses that exceed $7,500. But you could only deduct those medical expenses if you are itemizing (not taking the standard deduction). * Note- the threshold jumps from 7.5% to 10% in 2020.
One of the changes under the recent Tax Cuts and Jobs Act is that you can no longer deduct miscellaneous employee business expenses. This change has a more-significant impact on union members, public servants and sales professionals who are not fully reimbursed for their travel, cell phone or entertainment expenses.
For small business owners and independent contractors, your business expenses must be ordinary and necessary to be deductible. This means they must be common and accepted in your industry and they must be helpful and appropriate for your specific trade or business.
Here is a more in-depth summary of what you can and cannot deduct on your 2019 tax return:
- Preventative Care, Treatment, Surgeries, Dental and Vision Care: You can also deduct visits to psychiatrists, psychologists, prescription medication, glasses, contacts and hearing aids.
- Alcoholism Treatment: Amounts paid for inpatient treatment to a therapeutic alcohol addiction center are deductible. This includes meals and lodging provided by the center during treatment.
- Fertility Enhancement: The cost of the following infertility treatment procedures are deductible:
- In vitro fertilization, including temporary storage of eggs or sperm.
- Surgery, including an operation to reverse prior surgery that prevented you from having children.
- Guide Dog and Service Animals: The cost to purchase, train and maintain a guide dog or service animal to help a visually impaired, hearing disabled or physically disabled person are deductible. These expenses include food, grooming and veterinary care.
- Stop Smoking Programs are deductible, but the cost of non-prescription drugs is not deductible.
- Any Reimbursed Medical Expenses that were paid by your employer or insurance company are not deductible.
- Weight Loss Programs that focus on general health are not deductible. However, if the weight loss treatment is for a specific disease diagnosed by a doctor (obesity, heart disease, etc), the expense is deductible.
- Nonprescription Drugs and Medicine (except for insulin) are not deductible: Only prescription drugs are deductible.
- Health Club Dues: Any expenses paid to improve your general health that are not related to a medical condition are not deductible.
- Cosmetic Surgery: Any surgery that does not meaningfully promote the proper function of the body, prevent or treat an illness or disease is not deductible. You can, however, deduct cosmetic surgery if it is necessary to improve a deformity arising from a congenital abnormality, personal injury or disfiguring disease.
- Gambling Losses to the Extent of Gambling Winnings: Gambling losses can include wagers, or other expenses incurred in connection with the gambling activity; but they are limited to the extent of the gambling winnings. In other words – you cannot take a net gambling loss, but you can use your losses to wipe out any gambling winnings.
- Casualty Losses: ”Generally, you may deduct casualty and theft losses relating to your home, household items, and vehicles on your federal income tax return if the loss is caused by a federally declared disaster declared by the President.” IRS Website
- Theft Losses – The amount of your theft loss is generally the adjusted basis of your property because the fair market value of your property immediately after the theft is considered to be zero.
- Losses from Ponzi-Type Investment Schemes: Deductible as theft losses from income-producing property.
- Home Office: You can take a home office deduction if you are self-employed and you use part of your home regularly and exclusively for business purposes.
- Club Dues: Club dues (as we state below) are not deductible. The following organizations, however, are not treated as clubs organized for business, pleasure, recreation or social purpose (unless one of the main purposes is for entertainment):
- Boards of trade
- Business leagues
- Chambers of commerce
- Civic or public service organizations
- Professional organizations
- Real estate boards
- Trade associations
- Unreimbursed Employee Expenses are no longer Deductible under the new tax code, unless you are a performing artist or serve in the Armed Forces as a reservist.
- Commuting Expenses: The cost of traveling from your home to your work is not deductible. There is an exception is for qualified performing artists and Armed Forces reservists. They can deduct the cost of hauling tools or instruments to and from work.
- Fines and Penalties: Any amounts paid to settle a liability for a fine, a civil or criminal penalty or a parking tickets are not deductible.
- Club Dues: Membership in any club organized for business, pleasure, recreation or social purpose is not deductible – this includes athletic, luncheon, sporting, airline, hotel and country clubs.
- Campaign Expenses: This applies to a candidate for any office and includes qualification and registration fees and legal fees.
- Lobbying Expenses and Political Contributions: According to the IRS: “You can’t deduct contributions made to a political candidate, a campaign committee, or a newsletter fund. Advertisements in convention bulletins and admissions to dinners or programs that benefit a political party or political candidate aren’t deductible.” Political Action Committees (PACs) are included in this list as well.