Many taxpayers are apparently giving Uncle Sam more of their hard-earned money than necessary.
Americans are not taking advantage of some big tax deductions that they believe to be illegal, according to a recent NerdWallet survey.
More than 2,000 adults in the U.S. were polled for the survey, which was conducted by Harris Poll.
The survey identified several valid federal income tax deductions that few folks claim. Specifically, only 16 percent of Americans who have filed taxes have taken advantage of any of these methods for landing — or increasing — a deduction:
- Making an extra mortgage payment
- Contributing to a traditional IRA after Dec. 31 but before the tax deadline (which is April 17 this year)
- Delaying income to the next tax year
- Combining a vacation with a business trip and then deducting the unreimbursed business expenses
Let’s take a closer look at one of those deductions available to many people — because you could be losing out on a lot of savings if you are eligible but pass it up.
NerdWallet found that 75 percent of folks believe it’s illegal to claim a tax deduction for contributing to an IRA after the end of the 2017 calendar year, but before the end of the tax year. Contributions to Roth IRAs are not tax-deductible but those to traditional IRAs are legally deductible, provided you follow the IRS’ rules for the deduction.
In fact, putting money in a traditional IRA any time before the 2017 tax deadline can lower your household’s 2017 taxable income by up to $6,500 per person.
Additionally, it can help you build up retirement savings. If you are just getting started building a nest egg, check out:
- “7 Tips for Stress-Free Retirement Plan Investing“
- “5 Simple Ways to Invest Your Retirement Savings“
- “Ask Stacy: How Do I Invest for Retirement Without Risk?“
For more news and tips for the current tax-filing season — including other legal deductions — check out our 2018 tax coverage.
What’s your take on this news? Were you aware that the five above deductions are legitimate? Let us know below or on our Facebook page.