Whether you choose to complete your tax return this year by hand, the old-fashioned way, with a multimedia interactive software package online, or by enlisting the help of a licensed tax professional, you need to be aware of the tax deductions and credits that are available to you.
Most taxpayers do claim their exemptions, and according to the IRS, $842 billion was claimed from personal exemptions in 2005. But there are many other tax credits available that may be overlooked.
“Do I choose to take the standard deduction or itemize?” That’s an important question many taxpayers will need to ask themselves prior to filing their tax return. In 2007, the standard deduction was $5,350 for single, $7,850 for head of household, and $10,700 for married or filing jointly.
However, in 2002, only one-third of taxpayers who filed their returns chose to itemize their deductions, according to the Government Accountability Office (GAO). The decision not to itemize turned out to be an on average loss of $438 per taxpayer, or in overall terms – $945 million.
Procrastination is the most common reason for not itemizing. Taxpayers are notorious for waiting until the very last possible hour to file their taxes. This overwhelming rush to complete their tax filing has many taxpayers losing out on the additional tax breaks that may be available to them by itemizing. Taking the time to collect tax records and the information needed for itemized deductions is well worth the time and effort.
For most taxpayers, electing to take the standard deduction or itemizing deductions can be fairly simple. Add up your real estate taxes, income taxes (state and local), and whatever mortgage interest you’ve paid. Now, compare this total against the standard deduction. If you are over 65, don’t forget that you can add an additional $1,050 if you’re married and $1,300 if you are filing single, to your standard deduction.
Many taxpayers make the mistake of not filing an itemized return, thinking that because they don’t own a home it won’t provide any significant tax break by itemizing. However, if you have had substantial medical bills, paid trustee or investment advice fees, made large donations to charity, paid substantial state sales or income tax, or had other substantial qualifying expenses, you may be pleasantly surprised to find your tax deductions work out to be far greater when itemizing than by using the standard deduction.
March 29th, 2009 by Tax Man in Tax Deductions, Uncategorized | No Comments
You need to know about your 
What’s the difference between a taxidermist and a tax collector? According to Mark Twain, “The taxidermist takes only your skin!” Many Americans would agree with him – tax bills often seem unreasonably high. Fortunately, there are many completely legal ways to reduce your taxes and keep more of your hard-earned money for yourself and your family. They’re called tax breaks.Tax breaks are provisions of the income tax code that reduce the amount you and your family have to pay. Some people think claiming tax breaks is cheating – something greedy corporations and rich people do – but it’s not. The famous Judge Learned Hand once stated, “There is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike, and all do right, for nobody owes any public duty to pay more than the law demands.” You are completely entitled to every tax break you qualify for, and not taking those breaks is only giving the IRS a gift they don’t deserve.