Let’s continue my discussion from the last column, in volume 20, issue nine of the Pulse, on commonly missed tax deductions for individuals. Here are a few more:
1. Missed out of pocket costs related to charitable giving and volunteering for a charity. Many parents find themselves assisting their church or school with supporting their children’s activities. Let’s start with a field trip chaperone, or a dance supervisor, or driving to an event; if the organization is a nonprofit charity, you can deduct a standard mileage rate of $.14 for every mile driven. Another example is when you may be asked to run an errand or take someone to a doctor appointment at the request of the church welfare committee, these miles are considered charitable contributions to the organization.
Another example: my kids went to a school that raised money from chili suppers or other events. As a parent we were “required” to bring a dozen cookies or a pie to sell. All these costs to make the cookies or the pies are fully tax deductible as a charitable contribution. (See my comments below on documentation.)
2. Missed Wisconsin income tax adjustments. The State of Wisconsin makes several additions and subtractions from Wisconsin Taxable Income on Form 1. A very commonly missed subtraction is Out of Pocket Medical Insurance payments made. This will include Medicare supplements one may own as well as special health insurance for dental or vision insurance.
Another subtraction commonly missed is for tuition paid to a Wisconsin-based post-secondary college or tech school. While the IRS does allow the American Opportunity and Lifetime Learning credits, the Wisconsin subtraction is ‘in addition’ to the federal credit. Again, this subtraction reduces Wisconsin taxable income dollar for dollar. (There is a max subtraction of $6,943 for tuition and mandatory fees paid.)
3. Documentation for charitable contributions. I would like to spend a minute talking about documentation for any expenses, but particularly as to charitable contribution deductions. First, all expenses claimed as a deduction of any kind requires minimum substantiation rules of the IRS. This would include original receipts kept in the file. We recommend keeping these five years. That said, there are a number of deductions that are routinely accepted by the IRS as “reasonable” in both amount and nature. Let me explain. When was the last time you received a receipt from a red kettle bell ringer from The Salvation Army? Never. How about the Girl Scout selling you a box of cookies? Never. When does a Church give a receipt for children giving a quarter or a dollar in the Sunday school plate? Never. My point here is this: it is okay to claim a reasonable amount on your tax return for these small, undocumented amounts. Typically I recommend an amount consistent with the taxpayers normal spending on such items: $100 or $200 per year.
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.