J.K. Lasser Daily Tax Tip brought to you by TaxACT
Everyone wants to get as much back in their tax refund as possible, but tax laws are constantly added, changed, or updated. The J.K. Lasser Daily Tax Tip, brought to you by TaxACT, provide some insight into complex tax situations and offers helpful advice and guidance. Now that's something everyone can use!

The Daily Tax Tip content is provided by America's all-time best selling tax guide, J.K. Lasser's™ Your Income Tax Guide 2006 by John Wiley & Sons, Inc. Tax advice provided by The Daily Tax Tip shall not be construed as a substitute for the advice obtained or given by a certified tax professional.

• Failure To Winterize Car
  The Tax Court held that the loss of an engine because of a failure to use antifreeze is not deductible as a casualty loss since the damage is not the result of a destructive force or accident but of personal neglect.
• Lost Bank Deposit
  If you have other miscellaneous deductions that exceed 2% of adjusted gross income, claiming investment loss treatment may be preferable to treating the loss as a casualty subject to the 10% floor or a bad debt subject to the $3,000 limit.
• Damage to Nearby Property
  The casualty must have caused damage to your property. Damage to a nearby area that lowered the value of your property does not give you a loss deduction.
• IRS Interest Abatement
  If the IRS extends the due date to file tax returns and pay taxes for a person in an area declared to be a disaster area by the President, the IRS will abate interest on past-due taxes for the period covered by the extension.
• Refund Opportunity for Nontaxable Disaster Mitigation Payments
  Under a 2005 law, property owners are not taxed on qualified disaster mitigation payments from FEMA (Federal Emergency Management Agency) to elevate or relocate flood-prone homes and businesses or build hurricane shelters. If you included such payments in income on a prior year's return, and the time limit for filing an amended return (47.2) has not expired, you can file for a refund on Form 1040X.
• Tax-Free Disaster Relief Payments to Individuals
  You are not taxed on disaster relief payments from any source that reimburses or pays you for unreimbursed costs of repairing or rehabilitating your personal residence, or replacing its contents, as a result of a Presidentially declared disaster.You are not taxed on payments, regardless of the source, that cover reasonable and necessary personal, family, living, or funeral expenses as a result of a Presidentially declared disaster, so long as they are not otherwise paid by insurance or other reimbursement. The exclusion also applies to payments made by the federal, state, or local government to individuals affected by a Presidentially declared disaster in order to promote the general welfare.
• Accelerating a Tax Refund With Disaster Loss
  Disaster loss rules give you a chance to deduct a loss earlier than under general rules. This may result in a tax refund for the prior year. You may make an election to claim the loss for the prior year in a signed statement attached to an amended return for that year if the original return has already been filed. List the date of the disaster and where the property was located (city, town, county, and state). To amend a filed return for the prior year, use Form 1040X. Consider making the election if the deduction on the return of the prior year gives a greater tax reduction than if claimed on the return for the year in which the loss occurred, or if you need the refund for the prior year tax and do not want to wait until you file your return for the year of the disaster to claim the loss.
• Deducting Loss in Proper Year
  Read the rules on this page to insure that you deduct your casualty loss in the correct year.
• Loss From Termites
  Termite damage is generally nondeductible since it often results from long periods of termite infestation. Proving a sudden action in the sense of fixing the approximate moment of the termite invasion is difficult. Some courts have allowed a deduction, but the IRS will bar deductions for termite damage under any conditions based on a study that found that serious termite damage results only after an infestation of three to eight years. Examples of other nondeductible casualty losses are at 18.11.
• Loss Prevention Measures
  The cost of preventive measures, such as burglar alarms or smoke detectors, or the cost of boarding up property against a storm, is not deductible.
• Sale of Property Under Hazard Mitigation Program
  A sale or other transfer of vulnerable property to federal, state, or local authorities (or Indian tribal governments) under a hazard mitigation program is treated as an involuntary conversion, thereby allowing a gain to be deferred if a qualifying replacement (see 18.19) is made.
• Extension of Time To Replace
  Within the time limits, you must buy replacement property rather than merely contracting to do so. If you cannot replace property within the time required, ask your local IRS area director for additional time. Apply for an extension before the end of the period. If you apply for an extension within a reasonable time after the statutory period has run out, you must have a reasonable cause for the delay in asking for the extension.
• Form 8853
  If you received payments in 2006 from a qualified long-term care policy, you must figure the amount of taxable payments, if any, on Form 8853.
• Long-Term Care Insurance
  Unreimbursed expenses for long-term care services to care for a chronically ill patient are deductible medical expenses subject to the 7.5% AGI floor. Depending on your age, all or part of premiums paid for a qualifying policy are includible in your medical expenses.
• Disability-Related Job Costs
  If you are disabled and incur costs to enable you to work, the payments may be treated as a deductible business expense rather than as a medical expense.
• Does Equipment Increase Value of Home?
  When special equipment is installed in your home to alleviate a disease or ailment, you must determine if it increases the value of your home. You generally may claim a medical deduction only to the extent that the cost of the equipment exceeds the increase in value. However, if you install a ramp or railing, widen doorways or hallways, or add similar improvements to cope with a disability, these are usually treated by the IRS as not adding to the value of the home.
• Nurse's Services
  The cost of a nurse's services is a deductible medical expense, even if the nurse is not licensed or registered, so long as he or she provides the patient with medical services. If household services are also provided, only the portion of the nurse's pay attributable to the provision of medical services qualifies.
• Meal Costs at a Nursing Home
  If the patient entered a nursing home to receive medical care, a deduction may be taken for meals and lodging while there, in addition to medical care costs.
• Counseling at a Private School
  The parent of a child with psychological problems may deduct only that part of a private school fee directly related to psychological aid given to the child.
• Meal Costs of Medical Trip
  While transportation to receive medical care is a deductible medical expense subject to the 7.5% AGI floor, meals while on a trip for medical treatment are not deductible. They simply replace the meals you normally would eat. However, if you are hospitalized, the cost of meals while an inpatient is a deductible expense.
• Deductible Travel Costs
  The costs of trips to receive medical treatment are deductible as medical expenses subject to the 7.5% AGI floor. The costs of a trip to a conference to learn about medical treatment may be deductible if recommended by a doctor.
• Multiple Support Agreement
  If you may claim a person as your dependent under a multiple support agreement, include with your m