Allowable & Non-Allowable Deductions in Personal Taxes

Allowable & Non-Allowable Deductions in Personal Taxes
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Tax deductions can cut your taxable income by hundreds or even thousands of dollars -- but claiming deductions you're not allowed to take can get you in trouble with the government. Fortunately, the Internal Revenue Service provides plenty of information about which deductions are OK and which ones are disallowed. Many deductions are only allowed if you itemize, rather than take the standard deduction.

Paying the Doctor

You can claim some of your medical expenses for the year as an itemized deduction, but not all your bills are allowable. Doctor visits, prescription drugs and hospital stays are all on the deductible list. So are items you might not expect, such as acupuncture and breast pumps, so review the list -- in IRS Publication 502 -- carefully. The publication also disallows a number of expenses. You can't claim cosmetic surgery, for instance, and no weight-loss programs unless a doctor says they're medically necessary. You can only write off allowable expenses greater than 10 percent of your adjusted gross income.

Home Sweet Home

When you buy a house, it comes with some significant deductions. Interest on your mortgage and property tax on the property are both deductible. However the IRS also disallows some home expenses. If your mortgage is more than $1 million, you can only deduct interest on the first million dollars. If you own multiple homes, only your main home and your vacation home get the interest writeoff. Property tax isn't deductible when it's an assessment -- tax money raised for improvements such as sidewalks or sewers on your street.

Charitable Giving

Donations to charity are deductible, but it's very easy to cross the line into non-allowed donations without noticing. If the charity doesn't have IRS authorization, it can't give you a writeoff. Giving to specific individuals or earmarking donations to go to a specific person is never deductible. Even if you're a professional -- a writer or an attorney, say -- the value of volunteering your time and skills doesn't qualify for a deduction. All your allowed deductions should have a paper trail, whether it's a bank statement or a receipt from the charity.

Going to School

The federal government has multiple options for saving on taxes when you spend money for college. You can deduct interest on your student loan. You can take a writeoff each year for up to $4,000 of your tuition and fees. Instead of a deduction, you can take a tax credit for up to $2,500 for the costs of tuition, fees and books. The credit comes right off your tax bill, not your taxable income, so it's usually a better deal. Some expenses, such as room and board, aren't allowable writeoffs with either option.