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.

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Tax Deductions for Mileage

Your daily round-trip commute is now a business mileage tax deduction, due to a IRS mileage reimbursement loophole that says:  Any miles driven between two business locations qualify as a business mileage tax deduction.  Thus, Your round-trip “commute” is 20 miles per day: 20 miles X 5 days = 100 miles per week, 100 miles per week X 50 weeks = 5,000 miles per year, 5,000 business miles X .36 cents = $1,800 mileage deduction.

Now you have a nice $1,800 mileage deduction – a mileage deduction that you’ve probably been entitled to for years but didn’t even know it.  $1,800 mileage deduction X 32% income tax rate = $576 in actual tax savings (27% federal income tax + 5% state income tax).  This is Five-hundred and seventy-six bucks: Savings every year.

For more details, check out this article on deducting your commuting mileage.

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