Many taxpayers overlook the long list of deductions that they may take when completing and filing their tax returns. The IRS has estimated that millions of taxpayers overpay their taxes each year mainly because they fail to avail themselves of all of the possible deductions. The tax professionals at the Thorgood Law Firm can help ensure that all taxpayers take advantage of any and all deductions that may apply to them. Here is the third part of our multi-part blog on the most overlooked tax deductions:
PAYMENT OF TAXES AS DEDUCTIONS
Estate tax on income in respect of a decedent
Any taxpayer that inherits an IRA from another individual whose estate was sufficiently large enough to be subject to the federal estate tax receives an income-tax deduction for the amount of estate tax paid on the IRA assets received. For example, if a $100,000 IRA is inherited with the money included in the estate of the donor, causing $40,000 of additional tax to be added to his or her estate-tax bill, as the money is withdrawn from the IRA, the $40,000 may be deducted by the IRA’s beneficiary.
State tax paid last tax return
If a taxpayer owes state tax in 2015, this amount may be included as a state-tax deduction on a 2016 federal return, together with state income taxes withheld from paychecks or paid pursuant to quarterly estimated payments over the course of the tax year.
State sales taxes
Taxpayers that file Form 1040 and itemize deductions on Schedule A have the option of claiming either state and local income taxes or state and local sales taxes, but not both. Whichever yields the largest deduction is obviously the right choice. The IRS offers a calculator to indicate how much residents of a particular state may deduct based on applicable income and sales tax rates.
Social Security taxes
This only applies to self-employed individuals that pay the full 15.3% social security tax on their own, rather than splitting it evenly with an employer. Thus, half of this amount may be deducted by these taxpayers, even if they do not itemize their deductions.
If you live in the New York or the Tri-State area and have any questions about any possible tax deduction, call THE TAX EXPERTS at the Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation, call 212-490-0704.
