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Overlooked Deductions You Do Not Want to Miss When preparing your tax return, you may be tempted to settle for the standard deduction rather than figuring out a whole series of individual items, which is known as itemizing, but you can save a lot of money by itemizing, especially if you own your home or live in a high-tax area.

You have probably heard that you can take an itemized deduction for things such as mortgage interest, property taxes, and charitable donations, but there are a number of often-overlooked deductions that can save you money.

Caution: To qualify for some of these potential deductions, your expenses have to rise above a certain level, usually a percentage of your adjusted gross income. In other cases, there is a limit on the deduction.

Here are some deductions that you might want to consider.

Medical Expenses
Your medical expenses need to total at least 7.5% of your adjusted gross income (AGI) in order for you to take the medical expenses deduction.

Some of your medical expenses are deductible as long as your total medical expenses exceed 7˝% of your income. For example, if your income was $40,000, you can deduct only the amount of your medical costs that exceed $3,000 ($40,000 times 7˝%). If your total medical bills were less than $3,000, you do not qualify for the deduction. Before you go through all of your doctors' bills and prescription receipts, do a quick calculation based on your income to make sure your time will be well spent.

While the threshold is pretty steep, you can meet the requirement by careful planning. For example, scheduling both elective surgery and your children's orthodontia in the same year may bring your medical expenses to the level at which you can take the medical deduction.

Deductible medical expenses include doctors' and dentists' fees, chiropractors' fees, lab fees, contact lenses, glasses, and medical supplies.

If you have a question about a particular medical expense, consult IRS Publication 502, Medical and Dental Expenses.

Caution: If you have medical insurance, make sure that you do not deduct the medical costs that were either paid or reimbursed by your insurance company.

You can deduct the premiums you pay for health insurance coverage - unless your employer pays for your coverage through a payroll deduction using pre-tax dollars. If so, you have already received a tax benefit for your premium payments, so do not deduct those premiums on your return. Consult your employer's benefits department if you are not sure.

Miscellaneous Deductions
Many miscellaneous expenses are deductible as long as they add up to at least 2% of your Adjusted Gross Income (AGI). As with medical expenses, grouping them together can help you meet the 2% threshold. Here are some items that you might not have thought of deducting, as miscellaneous expenses:

  • Tax Preparation Costs
    You can claim the cost of personal income tax preparation software or books as a miscellaneous deduction. If you hire a professional tax preparer to do your taxes, you may also be able to deduct the fee.

  • Education, Books, Magazines, and Memberships for your Work
    If you've been taking classes to maintain or improve your work skills, you can deduct the tuition as long as you meet the criteria. The same is true for the subscription fees for any professional journals and magazines related to your work. You can also claim annual dues paid to a professional society or union.

  • Job Search Expenses
    If you have been looking for a job - regardless of whether you are currently employed - the IRS allows you to claim job-hunting costs as miscellaneous deductions as long as you are looking for a job in your current line of work. That includes the cost of printing and mailing your résumé, long distance calls related to your job hunt, and travel costs to a job interview.

  • Job-Related Car Expenses
    When you use your car for business purposes (not including your commute), you can claim a deduction for the mileage (36.5 cents per mile) as well as the cost of any tolls and parking fees.

  • Investment Expenses
    If you subscribe to any magazines or journals pertaining to your investments, or buy a computer program to help you monitor your investments, you can deduct the cost - if it helps push you over the 2% AGI rule.
Other IRS-Approved Deductions
In addition to miscellaneous deductions, you also want to make sure you take full advantage of the following IRS-approved deductions:
  • Home Refinancing Interest
    If you used today's low-interest environment to refinance a mortgage and still have unamortized points left to deduct from an earlier refinancing, you can claim all the unamortized points from the earlier refinancing this year as deductible interest.

  • Home Equity Interest
    If you have a high-interest, non-deductible car loan or a large credit card balance, consider taking out a Home Equity Loan and paying off those debts. The IRS allows you to claim the interest payments on up to $100,000 of a Home Equity Loan (if you're married and filing separate returns, it's $50,000). Of course, only use a Home Equity Loan if you can comfortably afford the cost of the payments. Remember: your home is collateral for the loan.

  • Caution
    Document everything. If the Internal Revenue Service decides to question you about any of your deductions, you want to be able to provide all of your pertinent receipts and statements.