Tax Facts

By Professor Rick Gaumer, CPA

Every year I get many questions from taxpayers and others – “What can I do to reduce my tax bill?” A good question and one in which the answer can vary widely client-by-client.

That said, let’s look at some of the most common mistakes I see made by those trying to do their own income tax preparation and those who have always thought they were leaving tax dollars on the table. If you might be an “itemizer,” I tell my clients that finding one of these below to add $100 of new deduction will save an average taxpayer $20 in taxes. So let’s try to find one you may have missed; here are three.

1. Missed out-of-pocket costs related to a second job

It is common for many in the Door County area to take on multiple jobs over the course of the year, and to hold two jobs at the same time. The IRS disallows “commuting” to and from one’s primary job, but it does allow deductibility [Schedule A, Unreimbursed Employee Costs; subject to the two percent Adjusted Gross Income (AGI) floor] for additional miles driven to and from the second job. A quick example:  if you commute 10 miles to your job daily [five miles to and from] you are entitled to deduct a mileage deduction of $.565 per mile for all additional miles driven to/from that second job. 

2. Missed out-of-pocket costs unreimbursed by the employer

Related to the above, it is also common for an employer to either “not reimburse” costs you incur related to your job, or to reimburse a lesser amount than the IRS allows. Let’s talk about the first. If you incur a cost (such as a special work tool or office supply item), the employer may or may not reimburse you. The technical IRS rule is this:  you need to ask the employer to reimburse you, and if they deny, you can proceed to deduct these costs as Misc. Itemized Deductions subject to the two percent limit. As for the second, such as a mileage reimbursement by an employer of $.35/mile when the IRS rate is $.565/mile, the incremental difference of $.215/mile can be deducted as a Misc. Itemized Deduction subject to the two percent AGI limit.

3. Missed out-of-pocket costs for medical costs

There is a lower mileage rate of $.24/mile for any mileage traveling for health care. This would include miles to/from your doctor/dentist/chiropractor/hospital/etc. Further, there are some special rules for overnight travel for health care for the patient and one caregiver. Keep in mind, the new 10 percent of AGI floor for medical itemized deductions took effect in 2013, making an overall medical deduction much harder to obtain. Yet, should you have a big health care cost year, these miles can put you over the top.

That’s it for now. Next time I will continue with a few more frequently missed tax deductions.

Rick Gaumer has taught college-level accounting and income tax subjects for UWGB, UWM and Lakeland College for many years and is an expert on getting students prepared for the CPA exam. Gaumer now works as a tax consultant for the Leuthner Tax Office, an H&R Block affiliate located in Sturgeon Bay.