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My Love/Hate Relationship with Tax Deductions

Today’s post is super short.  Know why?  Because 2013 will be our first year ever that we aren’t taking the standard deduction on our taxes – the first year that we will be itemizing.  For everyone that has been doing this for a while, more power to you!  This is a pain in the butt.

Taxes

Finding All of Our 2013 Tax Deductions

Our life is complicated.  Before 2013 though, itemizing would have been a silly decision since the standard deduction for a married couple filing jointly was higher than what our deductions would have been – we had a small, low interest mortgage, no rental house, no HOA fees, no large medical expenses, etc.  We just filed our taxes, Schedule C forms for side hustles, and investment income stuff.  Done.

But we bought a new, larger home at the end of 2012, rented out our first home, tripled our housing expenses (and have that extra income), had major dental expenses, and so on.  For the first time ever, it will benefit us to dig up every deduction we possibly can find.  That means that I’ve spent the last 6 hours (and am not done yet) putting together totals for:

  • All Property Taxes
  • All Mortgage Interest
  • Home Insurances
  • Flood Insurances
  • HOA fees for the new house
  • Health Insurance Premiums
  • Medical Expenses
  • Utilities to take off a percentage of for our home office deductions.
  • Rent house deductions like contracted help, maintenance expenses, and mileage.
  • Volunteer mileage and expenses.
  • Side hustle income, expenses, and mileage.

I Hope It Pays Off

This coming Sunday, Mr. BFS will do our taxes by hand as usual.  By the end of the day, we’ll know whether we will see any of our $32,400 ever again.  I’m betting on $3000+.  Mr. BFS thinks we’ll be lucky to get back $1000.  Wish me luck!

Any deduction venting out there?  Tax stuff is AWFUL!

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9 comments to My Love/Hate Relationship with Tax Deductions

  • MikeS

    I agree. Tax stuff is awful. We have itemized since becoming homeowners some years ago. Once you start itemizing, it does become easier in the future because you know what information you need. The first time is rough though. It does take the sting slightly out of the doctor’s bill when you know you get some savings because of it. At least that’s what I told myself with my son’s bills. :-)

  • There’s a new home office deduction that you can choose to take rather than itemize (you don’t have to, but you can choose to do so): http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Simplified-Option-for-Home-Office-Deduction

    Not sure if that helps any, but just letting you know! Itemizing is a PITA – I’ve itemized practically since I started working, so I’m used to it by now. I have a file folder named YEAR taxes – and anything that would be itemized goes in there: charity, mortgage statements, etc. That way, it’s all together at the end of the year and I can just go through that folder (or the digital equivalent one I also keep)

  • Oh man. I hate hovering around that line where you’re so close to the standard and itemized deductions being the same amount. Luckily (or unluckily), the itemized has been vastly better for me for many years now

  • @MikeS, the first time is super tough and I’m thisclose to telling the IRS that they just need to stop the ride and let me off.

    @Mom of 3, that’s going to work really well for a friend of ours, but it gets us a lot more to itemize since our office is so big. I’m starting some envelopes for receipts for 2014.

    @Mario, it’s definitely better for us this year but grrrrr….

  • helen

    We have itemized for many years due to charitibe deductions. I was frustrated they changed the medical deduction rules this tax year. It used to be whatever was over 7.5% of your AGI and now it’s 10%. Would have added a bit to our deduction. I had a c-section and wisdom teeth removal, DH had a deviated septum fixed and we had various minor things and ER visits. Oh well! At least they kept the child tax credit at $1,000 (was supposed to drop to $500)

  • Hmm … not sure if a few people here are confused or not, but the Home Office Deduction has nothing to do with itemizing and Sch A. The Home Office Deduction comes off of your Sch C only. If you’ve been filing a Sch C for the past few years and taking the Home Office Deduction, you’ve already been keeping track of all of the assorted expenses used to figure the deduction – at least, I hope you have been ☺

    After the Home Office Deduction is figured for the Sch C, the excess of certain expenses flow to the Sch A – mortgage interest and real estate property taxes. Everything else is “lost” (cable, utilities, home repairs, homeowners insurance, etc) because you cannot claim those expenses on a Sch A.

    Take a long look at the new lump sum Home Office Deduction offered. Most of the Home Office Deductions I’ve dealt with this year are getting a bigger deduction by taking the lump sum offered instead of figuring the expenses via Form 8829 .

  • Crystal, reading this again, it sounds like you are lumping your health insurance premiums into your medical deductions on Sch A? If you are, can I ask why you are doing that instead of taking them off as an adjustment to income?

    Did you take a deduction last year for self-employed health insurance premiums?

    Maybe I’m reading this post wrong, because it reads as if you’re going to deduct your rental property expenses on Sch A, too. All of that goes on Sch E ☺☺

    Is your side hustle income a W-2 job, or are you talking about your pet sitting? Any side hustle that may be a W-2 job, you cannot deduct mileage for. Any unreimbursed employee business expenses can go on a Form 2106, which goes on the Sch A, but if you’re talking about your pet sitting, that goes on a Sch C. Are you filing two Sch C’s for yourself, or lumping your pet sitting into your main Sch C for blogging income?

    Apologies in advance if I misunderstood the post, LOL

  • Oh, and I forgot to mention – HOA fees are not allowed as an itemized deduction on Sch A ☺

  • @helen, I was really annoyed by that change too…especially since this is the first year it would have helped us.

    @Wendy, I only got these numbers together. What schedule they are used on is hubby’s job.

    But I looked over what he did and yes, some of these deductions were used on our main schedule, some on the Schedule C’s for our sole proprietorship and side hustles, etc. Our home office plus the extra percentage of utilities added up to more than the standard office deduction.

    Yeah, I was just showing the things I was looking up, not pointing out on what schedule that they’d be used. Our side hustles for last year was mainly his reffing, and it was a Schedule C business since he’s contract labor.