Every tax filing season, countless tax returns are filed by taxpayers who fail to claim all of the deductions and federal tax credits they are entitled to. According to Denise Sposato, a public relations manager for H&R Block, “People overpay their taxes by an average of $400 each year due to missed tax breaks and savings incentives.”
Experts speculate that taxpayers apparently are either unaware of all the deductions and credits available to them or fail to understand that they are entitled to them. There are some deductions so obvious that it seems impossible that people would overlook look them, like those available for mortgage interest and charitable donations. Yet countless taxpayers fail to itemize mortgage interest and as a result overpay their taxes by an average of $610 according to a GAO Report.
Many people make the mistake of settling for the standard deductions rather than itemizing. More than two million taxpayers use the standard deductions when they should be itemizing according to the estimates of H&R Block's Sposato. She advises, “Taxpayers who should definitely consider itemizing are homeowners and/or those who work or live in a high-tax area.”
Commonly Overlooked Deductions and Federal Tax Credits
According to an H&R Block press release, taxpayers commonly overlook:
- Recovery rebate credit
- Education tax benefits, including the Hope credit, Lifetime Learning credit and student loan interest deduction
- Earned income credit
- Child tax credit
- Saver's credit
- Medical expenses
- State and local taxes
- Self-employed business expenses
The company goes on to say that there are even more deductions people routinely fail to take advantage of each tax filing season. There are many different resources that are worth checking out that will provide tax advice and help taxpayers learn about all the deductions and federal tax credits they are entitled to.
Federal income tax guides like The Ernst & Young Tax Guide 2009 cover all the new tax law changes and how they might apply as well as many tax-saving tips. Free tax help is also available from numerous on-line tax services in conjunction with free tax return software.
New and Expanded Tax Deductions and Credits 2009
Not only should taxpayers take the time to acquaint themselves with the existing tax breaks routinely overlooked, there are a number of new or expanded tax deductions and credits to know for 2009. The IRS has published on its official website notable changes affecting individuals.
- The Making Work Pay Tax Credit increased take-home pay through reduced payroll withholdings, but it must be claimed when filing taxes. The credit amounts to $400 for working individuals and $800 for working couples.
- The First-Time Homebuyer Credit has expanded. Taxpayers who purchased a home in 2009 can get a credit of up to $8,000 with no payback requirement. New legislation extends and expands this credit to homes purchased by April 30, 2010.
- The New Vehicle Sales Tax Deduction provides that taxpayers who buy qualifying new vehicles in 2009 can deduct the state and local sales taxes they paid or other taxes and fees they paid in states with no sales tax. The deduction is available whether taxpayers itemize or not. For those who do not itemize it is added to the standard deductions.
- The American Opportunity Credit is a higher education expenses college tax credit and provides up to $2,500 in tax credits on the first $4,000 of qualifying educational expenses.
- The Earned Income Tax Credit a tax credit that lowers taxes and gives a bigger tax refund for qualifying persons has been enhanced for 2009 and 2010. This credit contains a special Head of Household rule for those separated from a spouse.
- The Child Tax Credit that reduces taxes by providing a tax credit for money spent on day care and child care services has been expanded for 2009 and 2010.
- Unemployment Benefits representing the first $2,400 received is tax free in 2009.
- Health Coverage Tax Credit is increased from 65 percent to 80 percent of qualified health insurance premiums and more people are eligible.
Tax preparation software, even the online free tax software does a good job of identifying possible deductions and federal tax credits as long as the interviews included with the programs are completed accurately. Even those who choose to prepare and file their own taxes should consult tax preparation professionals for tax advice and help if needed if they are unclear about possible deductions and credits they qualify for.
Larry Darter - Larry Darter is a freelance writer and published author with three books to his credit. He is a graduate of the Univ. of Central ...
