Not Taking the Right Simple Deductions could Cost Taxpayers
Most taxpayers are honest
The vast majority of American taxpayers are honest when it comes to filing and paying their taxes. The huge tax cheats are rare. Instead of taking advantage of the system, it is actually the opposite that is true; most Americans do not take advantage of legitimate deductions and overpay on their taxes. The IRS reports that taxpayers usually make the same mistakes every year. The biggest mistake made on returns every year is not including your Social Security number. Luckily, this will only cost the taxpayer time and not money.
Convenience can be costly
Approximately 85 million taxpayers choose to take standard deductions as opposed to itemizing their tax returns. Only 46 million people itemize their returns. The smaller group of taxpayers actually claims twice the amount of deductions as the larger group. Itemized deductions account for a trillion dollars of deductions while standard deductions account for a cheeky half trillion. Only legitimate deductions are included in these numbers from the IRS, so the itemizers are not cheating. Sadly, most people admit they file the standard form out of convenience and a lack of documentation. This convenience and lack of proper record keeping could be costing some taxpayers to pay four times their rightful tax obligation.
State sales tax most overlooked
Everyone is entitled to claim state sales tax they paid during the course of a tax year. The IRS provides tables showing how much can be deducted for each state based on income. The biggest advantage for people living in those states without an income tax, but everyone can benefit from this deduction. In addition, there are items that can give a tax payer a bigger deduction than what the tables show. For example, if a boat, car, or airplane was purchased, that sales tax can be added to the amount shown in the table. State sales tax on home building supplies are also deductible.
Giving could get you a deduction
Most tax payers already take the appropriate deductions for contributing to charitable organizations in the form of money. Taxpayers deduct money they contributed to religious groups, homeless shelters, etc. That said, most taxpayers don't capitalize on the out of pocket deductions for doing good things. For instance, a cake baked for a church fundraiser is a charitable contribution, and thus the cost of ingredients is deductible. In addition, the taxpayer can claim 14 cents per mile for delivering the item.
Children benefit from Mom and Dad’s help
Interest paid is a common deduction. Most people know to deduct interest paid on mortgages and student loans. College students and graduates not claimed as a dependent can benefit from Mom and Dad’s help. The IRS treats interest paid on a student loan by a parent as money given to the student who then paid the debt. As long as the child is not claimed as a dependent by the parent, the child can claim the interest as a deduction on his/her tax return.
Tags: a tax year, deductions, overlooking, overpay, state sales tax, taxpayers