Tax deductions save you money on federal taxes when you file your return. A tax deduction is a monetary amount for specific costs, losses and contributions that you are allowed to subtract from your income for the year, reducing the taxes you owe. Expenses and losses that you are permitted to subtract from your income under Internal Revenue Service (IRS) regulations are considered tax-deductible.
Unreimbursed Employee Expenses
Expenses you paid for items or services relating to your job that your employer didn't reimburse, like uniforms, tools, travel expenses and business education, are deductible, per the IRS. The items and services for which you claim deductions do not have to be required for your job, but must be useful and considered common in your line of work. You can depreciate cell phones or computers you own and are required to use for work. You can also deduct dues paid to a trade association.
Loss from Theft
Loss of your personal property or real estate due to theft can be deducted on your return. Theft includes more than robbery; blackmail, embezzlement, extortion or ransom paid due to a kidnapping are all deductible, per the IRS. Loss due to fraud or misleading information may be deductible if the scam is expressly illegal in your state. However, you cannot take a deduction for stock or an investment that lost value due to illegal conduct by the corporation.
Donations Other Than Cash
Cash donations are common deductions, but other types of donations are also tax-deductible. You must determine the fair market value of other donated items, and an appraisal by a professional is sometimes necessary. Used clothing may be deductible based on the estimated value of the item. Clothing worth more than $500, such as a fur coat, requires a value appraisal. Jewelry, artwork, stamp and coin collections are deductible if donated, as well as large items, like a house or car. Some personal investments, such as an annuity or stock, are deducted based on the value at the time of the donation.
- tax forms image by Chad McDermott from Fotolia.com