3 tax deduction myths that won't die
No, you can't deduct credit card interest (usually), job-hunting clothes or commuting costs. But people keep thinking they can.
This post is from Jacoba Urist at Wise Bread.
I spent a fair share of my mid-20s lugging around a two-volume set of the Internal Revenue Code to class every day (picture a small woman with two encyclopedia-size bricks on the subway), so I know firsthand just how overwhelming our tax laws can seem.
Every tax season, people ask me about the same mythical deductions -- stuff they feel they ought to be able to deduct on their tax returns, even though the government doesn't exactly see eye-to-eye with them. It pays to take a look at these three common points of confusion before filing.
Can I deduct my personal credit card interest?
Nope, unfortunately not. When you make personal charges on your plastic -- like going out to eat, trips to the grocery store or Disneyland, really any of the expenses you associate with your daily life -- the interest is never deductible.
Here's the source of the misunderstanding. You used to be able to deduct credit card interest. But you can thank President Ronald Reagan and Congress (Democrats and Republicans alike) for eliminating the interest deduction for consumer loans, which includes your MasterCard or Visa. They believed that consumer-interest deductions generally encouraged folks to overspend and over-borrow, so they changed the law.
People may also be confused because you often can deduct the interest that you pay on the business expenses you put on your credit card.
A note of caution: If you are self-employed or run your own shop, I always recommend having a separate credit card for business purposes (or else it's nearly impossible to calculate which portion of the interest is deductible).
Can I deduct my new interview suit or work clothes?
Here's another one I get all the time, especially in the current job market when so many people are out there pounding the pavement and the cost of getting your foot in the door adds up pretty quickly.
The tax laws are a little tricky here. You can't deduct your new interview outfit (on the theory that you could also wear it for personal use, like to a cocktail party, wedding, date or any other event where you want to look pulled together). And you can't deduct the cost of your ordinary, run-of-the-mill work clothes, either. Think: no deduction for things I could otherwise wear out in public anyway -- normal pants, dresses, skirts, shirt -- even if you work at a clothing store that asks you to dress nicely while you're on the clock.
But there is some good news. While your fancy interview suit is off-limits, you may be able to deduct some of the expenses you rack up looking for a job, like the amount you pay to an employment service and the cost of preparing and sending out all those resumes.
There is a clothing deduction exception if you wear a specialized uniform to work and it's not suitable for everyday life. (How many UPS guys are going to whip out their uniforms to wear around town on their day off?)
Can I deduct my commuting costs?
Again, this one is a no-go for the Internal Revenue Service. You can't deduct the cost of commuting from your house to your job, on the theory that you choose where you want to live in relation to your workplace and the time in your car or on the train is personal.
But of course, because it's the tax code, there is an exception. People who are self-employed with a home office may be able to write off some of the costs of traveling between their residence and another location where they have work-related business. You may also be able to deduct the costs of going from your job (wherever you work) to other work-related meetings and outings.
My advice? Sit down with an accountant or tax professional if you plan on deducting these kinds of costs on your return, so you can make sure you're calculating everything properly.
More from Wise Bread and MSN Money:
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.