tag:blogger.com,1999:blog-2135788133426971614.post3062815079232982942..comments2024-03-28T01:09:48.303-07:00Comments on 21st Century Taxation: Overlooked Tax DeductionsProfessor Nellenhttp://www.blogger.com/profile/03288632402197167948noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-2135788133426971614.post-62793285205614357362012-04-18T09:52:37.177-07:002012-04-18T09:52:37.177-07:00Hi Professor,
During my recent experience as a tax...Hi Professor,<br />During my recent experience as a tax preparer I got an opportunity to think about what you have mentioned here. Even though there are lot of incentives that taxpayers can take advantage of most of them are not utilized to reduce tax liability. One reason I guess is the exceptions and special rules to take these deductions. For high income taxpayers these credits are phased out (for example American opportunity credit phased out at $180000,while the maximum credit is $2500 it varies based on AGI) and for low income tax payers unless they have enough itemized deductions over the standard deductions they can’t use these deductions. Another reason I think is the lack of awareness. I recently came across deduction for ‘tuition expenses for children with special needs” which taxpayers can deduct as part of their medical and dental expenses. I am not sure how many people would know such a deduction exists. Another example is educational expense deduction under Schedule A 2% floor. If a taxpayer incurs educational expenses to improve his job related skills, apart from taking education credit he/she could also deduct the cost of materials, travel, research and study expenses related to education as part of itemized deduction. Since many of the taxpayers do not know about this they don’t maintain records and bills to make use of this deduction. <br />http://www.irs.gov/taxtopics/tc513.html<br /><br />Another issue is the frequent law changes which makes taxpayers difficult to keep track of these changes. One classic example is the property tax deductions for CA purposes. There was a new rule effective beginning this year which stated that the special charges paid along with property taxes are not deductible for California purposes. This rule was backed off just a few days before tax filing deadline as a result of which many taxpayers lost the extra deduction they would have got if such a change of provision was not enacted at all. <br />https://www.ftb.ca.gov/individuals/Real_Estate_Tax_Deduction/index.shtml<br /><br />Overall I think such tax incentives would be more effective if there is enough awareness among taxpayers and they are simple to understand and follow.Srividhyanoreply@blogger.comtag:blogger.com,1999:blog-2135788133426971614.post-91974422492823630952012-04-18T09:48:11.661-07:002012-04-18T09:48:11.661-07:00This comment has been removed by the author.Srividhyahttps://www.blogger.com/profile/05008538680320581974noreply@blogger.com