Deductions
Kirsten Simmons avatar
Written by Kirsten Simmons
Updated over a week ago

Deduction Reporting

Travel Expenses

This applies to moving the family from the U.S. to Australia for work.

Report it on Taxes & Deductions > Deductions tab, question Moving expenses (provide a breakdown by specific expense type).

Medical and Dental Expenses

Report it on Taxes & Deductions > Deductions tab, question Medical and dental expenses/insurance premiums (only if > 10% of gross income).

Home Mortgage

Report it on Taxes & Deductions > Deductions tab, and answer Yes to the question Did you own residential real estate during the tax year?. Then answer the question Do you have a mortgage on the residence in which you live? and subsequent questions.

I work out of my house. Can I deduct my phone/electricity/etc. bills?

Report it on income> Self-Employment question Do you want to itemize your business expenses? Answer Yes to the question Is your office based out of your home?, then complete the Office in Home section.

I use my car for work. Can I deduct the gas/other car expenses?

Report it on the Income > Self-Employment question Do you want to itemize your business expenses? Answer Yes to the question Do you have auto-expenses?, then complete the Auto Expenses section.

Educational Expenses

Report it on Taxes & Deductions > Deductions tab, question Did you incur higher education expenses for yourself, your spouse, or dependents (college and beyond)?

Child Care Expenses

Report it on Taxes & Deductions > Deductions tab, question Did you incur childcare or other dependent care expenses?, then provide the details.

Foreign childcare is also an eligible deduction. Child care (even abroad) is tax deductible, and you should provide the details.

Can I (and how) deduct the money I have been paying my mother regularly to help her make ends meet?

If your mother

  1. Has a U.S. Social Security number and

  2. You provide for more than half of her annual income

Then you can add your mother as a dependent and take a personal exemption of $3,900 on your tax return.

This is also unrelated to the Foreign Earned Income Exclusion and can be used.

Can I claim to pay my daughter's college tuition, even if she files her own 1040ez?

You can deduct your daughter's tuition as long as she is dependent on YOUR tax return.

She may file 1040EZ but should NOT claim a personal exemption, or you won't be able to list her as a dependent.

I am self-employed and take clients out for business

Report it on income> Self-Employment, question Do you want to itemize your business expenses?


Charities & Donations: What’s tax deductible?

Contributions to non-U. S. charities can not be deducted in the U.S. except for certain Canadian, Israeli, and Mexican charitable organizations.

Donations to Canadian charities are tax-deductible in the U.S. However, unlike Canadian tax returns, which allow donations to be deducted, U.S. tax returns use "itemized" deductions. Not every U.S. taxpayer benefits from itemizing; "standard" (fixed amount) deductions are often more cost-effective. However, if you do not itemize, you cannot deduct charitable donations. Please let us know the amount of your donations, and we'll figure out which type of deductions (itemized or standard) would be more beneficial for you.

If you have receipts for various expenses deductible in your country of residence, It is sometimes possible to deduct the same expenses on your U.S. tax return. However, the method for claiming deductions to reduce gross income in the U.S. differs from that used in most other countries.

The taxpayer can either claim a fixed amount (standard deduction) or a separate deduction for each item (itemized deductions).

The Standard Deduction

The standard deduction amount depends on your filing status (from $6,200 through $12,400 for the 2014 tax year, annually adjusted for inflation). The choice between the two methods depends on how much you can deduct by itemizing. More than half of taxpayers benefit from claiming the standard deduction because the sum of each of their itemized deductions would not exceed the amount of the standard deduction. Additional benefits of claiming the standard deduction include: not needing to keep records of your contributions and a lower risk of a random audit.

Itemized deductions

Itemized deductions are worthwhile if the taxpayer paid U.S. state income tax or mortgage interest on the personal (not rented) property. In these cases, the sum of miscellaneous deductions (such as charitable contributions, medical expenses, gambling losses, etc.) and these significant deductions are often greater than the amount of the standard deduction.

All expenses related to income generated by rental properties or business activities may not be claimed as personal itemized deductions. Those deductions should be claimed via the appropriate rental or business schedules. Please note that various personal expenses which may be deductible in your country of residence (i.e., commuting expenses, burial expenses, home repair expenses, and licensing fees) may not be claimed as itemized deductions.

We assess the amount you can claim using each method to determine which type of deduction will benefit you the most.


529 savings plans and their impact on your tax return

The main advantage of contributing to a 529 plan is that you'll be eligible for a deduction from your state income tax (in some states only). If you don't file a state tax return, you won't be eligible for a deduction for contributing to a 529 plan.

The other advantage of contributing to a 529 plan is that growth in the plan is tax-free at the federal level.

  • If you can find a way to invest your money in a 529 plan and generate income, then this type of investment makes sense.

  • It's similar to contributing after-tax money to ROTH IRA, except the conditions for withdrawal are different, and the amount you can contribute may be higher depending on the particular plan.


Alimony: receiving it, paying it, and its impact on your taxes

I pay alimony and/or child support to my ex-spouse. How can I report this expense, and can it reduce the tax I owe?

Child support cannot be deducted in any way.

Alimony can be deducted if your spouse has a U.S. Social Security number. If your spouse is a non-U.S. person, we will determine if your alimony payments qualify you for the full deduction. It depends on the terms of the Tax Treaty between the U.S. and the country where your ex-spouse resides.

NOTE: The above applies to divorce agreements signed on December 31st, 2018. Even though payments may be made in 2019 or later, the above applies. For divorce agreements signed after January 1st, 2019, or later, alimony cannot be deducted by the payer.

I receive alimony and child support from my ex-spouse. How will this affect my taxable income?

Child support is not included in your income. It is paid to your child, and you act as only a custodian/trustee for the child.

Alimony is included in your taxable income. Provide your ex-spouse’s name and Social Security number if you have it. If your spouse is a non-U.S. person, it is unnecessary to provide this information.

NOTE: The above applies to divorce agreements signed on December 31st, 2018. Even though payments may be received in 2019 or later, the above applies. For divorce agreements signed after January 1st, 2019, or later, the receiver does not include alimony.


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