Many taxpayers are giving Uncle Sam more money than they should, either out of haste or because the process of documenting tax deductions and filling out the 1040 income tax form intimidates them.
The amount of deductions you claim can substantially lower your tax bill. For example, itemized deductions totaling $10,000 reduce taxes for a person in the 15% bracket by $1,500 – enough for a big screen HDTV. Additional deductions of $10,000 would cut taxes by $3,500 for a person in the 35% bracket. Coming up with itemized deductions that will add up to more than the standard deduction is easier than you might think. There are about 350 deductions available, says Greene-Lewis. The biggest for most people is the mortgage interest deduction. The average mortgage interest deduction for households with an adjusted gross income of $50,000 to $100,000 was more than $10,000. Homeowners can also deduct property taxes, Greene-Lewis notes. State and local income taxes can also be deducted. The verdict
This is a no-brainer. Spend $40-$50 on tax preparation software such as TurboTax – and there are others from which to chose – and an hour at the computer to figure out if your possible itemized deductions add up to more than the standard deduction. Pay your fair share, but don’t pay more than that.