Think of More Income Tax Deductions - The IRS Really

Think of More Income Tax Deductions - The IRS Really Wants to Save You Money

Americans claim more than $1 trillion in deductions in their income tax returns every year. And millions more claim standard deductions that amount to half of that in addition. But that's not nearly enough for the IRS. It reports that of all the silly, avoidable mistakes we make on our tax returns, the ones we should pay special attention to, this year, have to do with not putting down enough allowable deductions. For example, if you just made it to 65, your prize is that you get to claim a larger standard deduction than the rest of us. Of course, paying taxes is good for the country. It means more roads and more schools. But what living, breathing human would want to be in hock to the IRS for any more than he or she absolutely had to? So what are the income tax deductions that we all insist on sparing the IRS on, most of the time?

A lot of mutual fund investors have the automatic reinvestment option turned on in their stock ownership. Whatever you make on your investments in dividends are just ploughed back to buy you more shares. And that sets you up for bigger taxes coming from bigger assets. The thing is, when people cash in their investments, they forget that they already paid the taxes once, when those shares were bought. And so they just pay taxes on them all over again. Just make sure that you take note of how many shares you invested in to begin with, and how many you have at the end of your term. This may not strictly be a deduction though; it's just that you shouldn't have to pay twice for anything.

If you have been looking hard for your first job out of college for the past three months, hunting for it, traveling to interviews for it - none of these expenses is considered allowable as an income tax deduction. But if you do get that job, and you have to pick up stakes and move over to another state for it, those expenses certainly are allowable deductions. People get confused, and think that nothing you spend before you land a job is deductible. And it isn't just for your first job either - it is for every job you move for.

Let's say that you live in a state that doesn't have income tax; what they will have is a sales tax instead. It will come down then to how you will need to choose between deducting sales taxes or income taxes, one or the other. Income taxes are almost always more expensive; so deducting that would make the most sense for you. Of course there is a limit to how much you can do that; and the IRS publishes that information. Let's say that you bought a new car. You could just add the sales tax on the purchase, to what the IRS says you can for your state. People hate paying taxes, don't they? Why don't more people know about these income tax deductions?

Of course everyone knows about deductible contributions to charity; but how about the 'charitable work you did, answering a call for jury duty? Well, you get paid a salary, but the pay you get at your day job, your boss will often have you give back. How do you tell the IRS not to charge you for that one? On line 36 on the form is where.

Perhaps, if people saw how hard the IRS tried to save them money with income tax deductions, they wouldn't hate them so much.