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Note those deductions now
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June 28, 1999: 8:06 a.m. ET
Tracking expenses all year long may lead to tax savings next April
By Staff Writer Nicole Jacoby
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NEW YORK (CNNfn) - Birth control pills, gambling and charity may have more in common than you think.
They're all tax deductible, and every year thousands of taxpayers overlook these and similarly serendipitous allowances.
"The reason people miss these is because they simply procrastinate and rush through it. They don't pay attention throughout the year," said Carol Thompson, an enrolled agent and a committee co-chair at the National Association of Enrolled Agents.
While $5 or $10 here and there may not seem like a lot, small deductions can add up to yield significant tax savings. Write-offs worth $100 translate into about a $30 reduction in taxes owed, says Thompson.
"It's just little stuff. But if you add it up, you can save a couple of hundred dollars in taxes," she said.
Leaving a paper trail
Most people don't like to think of taxes more than once a year, but taking advantage of as many deductions as possible requires diligent record-keeping all year round.
"The biggest problem is people don't keep good records," said David Mellem, research manager for the National Association of Tax Practitioners. "If people kept better records, they'd save money."
Thompson recommends people establish a simple filing system, with one slot for each category of deduction, rather than filing items by month.
"It's a very easy system. Drop everything for medical in one slot, everything for car in one slot… then at the end of the year, you know exactly what you spent," Thompson said.
Medical costs
Medical costs are among those deductions most commonly overlooked.
The Internal Revenue Service allows taxpayers to write off a wide range of medical and dental expenses, provided they exceed 7.5 percent of your adjusted gross income.
To qualify, expenses must be intended to alleviate or prevent a physical or mental condition or illness. Doctor's visits, surgical procedures, prescription drugs, contact lenses and hearing aids are all deductible.
Expenses related to cosmetic procedures do not qualify, nor do those that are merely beneficial to one's general health, such as vacations. In addition, health club dues, weight loss programs, dancing or other recreational lessons are not eligible, even if those activities are recommended by a medical professional.
But medical deductions may be more wide-ranging than you think.
Acupuncture and chiropractic, for instance, are deductible, as are legal abortions and birth control pills if prescribed by a doctor.
In addition, insurance premiums and transportation costs related to medical care can be written off. If you have to drive back and forth to a hospital for physical therapy, for example, you can deduct those trips at 10 cents a mile.
Because many people's out-of-pocket medical costs are unlikely to exceed the required 7.5 percent of their adjusted gross income each year, Thompson recommends "bundling" costs every other year.
"If you are getting some big work done, then this is also the year to get new glasses or get some dental work done," Thompson said.
For instance, if you are planning to spend $4,000 on braces in 1999, you are much more likely to cross the 7.5 percent barrier and be eligible for medical deductions. Consequently, you should make any other necessary medical purchases or appointments before the year ends if you can.
Bear in mind that you can only deduct those expenses that were paid this year, regardless of when the services were provided. And you cannot include costs that were covered by an insurance company or other source.
See Publication 502 for more details.
Deducting work
The IRS also makes a series of allowances for costs incurred through work.
If your job requires unreimbursed travel, you may be able deduct any expenses related to business trips, including transportation costs, lodging and meals. Baggage charges and cleaning and laundry expenses can also be written off.
Even business gifts and entertainment costs can be deducted, provided they are necessary part of work.
The IRS also cuts job seekers a break, provided they are currently employed.
Even if you are unsuccessful in landing a new position, you are permitted to write off all expenses related to your search, including employment agency fees, resume costs, and transportation costs.
"You have to be able to prove that the main reason you are traveling is because you have a lot of interviews set up," said Mellem. "You can't deduct a trip to Hawaii if the main reason you are going is because you just got married (and you happen to have one interview.)"
Job-seeking deductions are limited to those who are already employed. If you are looking for a job for the first time or if there has been a substantial break between the end of your last job and your search for a new one, you do not qualify.
Those pesky extras
If you always thought it was unfair that you had to shell out extra cash because your job happens to require special clothes, don't despair. The IRS is on your side.
Work clothes and uniforms are deductible, as are their upkeep, provided you must wear them as a condition of your employment and they are not otherwise suitable for every day wear. For instance, nurse and postal uniforms are deductible, but painters' overalls are not. Protective clothing and gear, such as safety shoes or hard hats, are also deductible.
Membership in a professional organization is strongly recommended, if not mandated, by some companies. Luckily, these dues can be written off.
This includes boards of trade, business leagues, civic or public service organizations, real estate boards, and trade associations. But you cannot deduct dues paid to an organization if its main purpose is to conduct entertainment activities.
Publication 463 offers more details on travel, entertainment, gift and car expenses.
Good Samaritans
If you are generous by nature, Uncle Sam wants to reward you. Any charitable contributions -- both cash and noncash -- made to religious organizations, nonprofit schools and hospitals, the Red Cross, the Salvation Army and the like can be written off.
While many people are aware of these deductions, they may not realize that transportation costs related to charity work are also deductible.
For instance, if you volunteer at a halfway house or hospital, you can write off the mileage costs to and from your destination.
Anything that is personal in nature, such as church attendance, however, cannot be deducted.
Publication 526 has the details.
Investments and Income Costs
Wall Street's strong performance is not the only reason to invest in stocks. Any costs incurred as a result of investing or paying your taxes can usually be written off.
You can, for instance, deduct broker fees if you are an investor, and any expenses related to tax preparation, including the cost of accountants, software programs and tax publications.
A safe deposit box used to store investment-related papers is also deductible, as is the depreciation on your home computer if you use it to manage your investments. You can also write off clerical help and office rent that you have in connection with your investments.
If your idea of investing is gambling, you still may qualify for some deductions. Gambling losses can also reduce your overall tax bill, provided you keep an accurate diary of your winnings and losses throughout the year.
For other income-related deductions, check out Publication 529. 
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