Most people are entitled to claiming tax benefits

by Carole Feldman
Associated Press

Donald Trump’s acknowledgement last fall that he had not paid federal income tax in years left some questioning why they should have to pay taxes.

“I think you pay taxes because it’s the right thing to do,’’ National Taxpayer Advocate Nina Olson says.

But that doesn’t mean you don’t take tax benefits to which you’re entitled.

“It’s easy to point to some of the provisions that you may feel are in the law that are written to let some people pay zero taxes and ignore that you are getting significant benefits delivered to you through the Internal Revenue code to you, yourself,’’ she said.

“If you’re an employee, you might be benefiting from employer provided health insurance or tax deferred retirement savings,’’ she said. “If you own a home, you may be benefiting from the deduction of mortgage interest, and those are significant.’’

People tend to focus on special interests during discussions of tax reform. But Olson said, “the biggest special benefits go to the middle class, or anybody who owns a home or has a retirement account or gets employer-provided health insurance.’’

Tax experts say many people over-pay their taxes because they are not taking advantage of all the credits and deductions to which they are entitled. Greg Rosica, a tax partner at Ernst & Young, says that could include things like deducting mileage if you drive to volunteer at a charity or drop off a donation of goods.

If you’re self-employed, add up your business expenses. “There are many deductions, items that are directly deductible against wages,’’ Rosica said.

That can include things like the phone bill or paper for the printer _ or for the room in your house where you conduct your business. But if you want to take that deduction, “you must regularly use part of your home exclusively for conducting business,’’ the IRS says.

There are two ways to compute home office deductions _ one a simplified method of $5 per square foot for up to 300 square feet, and the other based on the actual costs of using the home office.

If you took out a new mortgage or refinanced an existing one and paid points, those may be deductible, but they have to be amortized over the life of the loan. If you suffered a major uninsured loss, that may qualify as well.

Contact lenses, eyeglasses and hearing aids qualify as medical deductions. So do breast pumps and lactation supplies and contraceptives, if bought with a prescription. The cost of travel to get medical care also may be deductible. The Tax Policy Center estimates that about 44.5 percent of taxpayers will pay no income taxes for 2016.

“Just because people don’t pay federal income tax doesn’t mean they don’t pay any tax,’’ center fellow Roberton C. Williams wrote on its website.

“In fact, nearly everyone pays something. Three-fifths of those who don’t owe income tax work, and thus pay Social Security and Medicare payroll taxes.

And almost everyone pays state and local sales taxes, excise taxes or some other levy.’’

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