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While you hunt for exotic deductions, don't forget details on the simple stuff.Mar 30 '01 (Updated Mar 31 '01) Write an essay on this topic.The Bottom Line State and local income taxes, real property taxes, and personal property taxes. Don't overlook the details of these basic deductions. While you search for exotic deductions, don't forget to take care of the simple stuff. Here are a few sure fire basics that will help anyone who benefits from itemizing deductions. Unlike medical deductions with their 7% of adjusted gross income (AGI) threshold and miscellaneous deductions with their 2% of AGI threshold, these will go right to the bottom line on Schedule A. The discussion here is couched in terms of the 2000 tax year. Deduct All of Your State Income Taxes Of course, you know state income tax is deductible, but be sure to consider all the ways you might have made state income tax payments during the tax year. I can think of six: 1) State income tax withheld during 2000 from your paycheck and reported on your 2000 W-2. If you worked several jobs, be sure to add up all the W-2s. 2) Additional state income tax withheld by your employer during 2000, for example withholding associated with the exercise of a stock option. Employers are supposed to report this on your W-2, but check carefully because tax mistakes on stock options are all too common. No matter what your W-2 says, report the correct figure in your tax return. 3) Any amount owed on any previous year's return that you paid in 2000. For example, if you owed $500 on your 1999 state income tax return and paid it on April 15, 2000, the amount is deductible in 2000. 4) Any estimated tax payments you made directly to your state during 2000. If you made your last 1999 estimated tax payment in 2000, it is deductible in 2000. If you made a 2000 payment in 2001, it is not deductible in 2000; you'll have to wait 'til 2001. 5) Any state income tax you paid if and when you filed a state income tax filing extension during 2000. Such an extension would have been for your 1999 tax return. 6) Any state income tax withheld "on your behalf" by a financial institution such as a bank, brokerage, insurance company, escrow or title company, etc. The financial institution will send you a form 1099-INT, 1099-DIV, etc. reporting the amount of state tax withheld. All of the same considerations apply to local income taxes in localities that have them. On the other hand, if you received a form 1099-G reporting a state or local tax refund paid to you during 2000, you have to report this as income on your 1040. Deduct All of Your Personal Property Taxes No one forgets to deduct property tax paid on a home or homes, but many states and/or localities also levy annual personal property taxes based on the value of automobiles, boats, airplanes, and various other items. You may deduct these annual levies to the extent they are based on the value of the personal property. For example, an annual motor vehicle "registration fee" of $200 may consist of fixed fees (such as registration and "smog" fees) of $40 and value based fees of $160. Only the $160 would be deductible. Most states send you an itemized statement. In the absence of such a statement, just look at the registration form you are required to carry in your car. It usually indicates the total charge from which you can estimate the value based component.  |
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