Taxpayers should examine overlooked opportunities

Many taxpayers may overpay every year by missing significant deductions and credits, according to Kiplinger, and would benefit from following a few accounting tips.

One of these is the state and local sales tax deduction. When filing federal returns, citizens must choose between taking a deduction for state and local sales taxes or state and local income taxes. For those in states which have no income tax, the choice is made for them, and all that is necessary is to remember to claim the sales tax deduction.

Taxpayers with a choice will generally benefit more from the income tax deduction, according to the source, but may experience an exception if they made a major vehicle purchase or bought homebuilding materials. Such items are expensive, and may push the sales tax deduction higher than the one for income taxes.

Investors and day traders who make their money in the form of capital gains might also benefit significantly more from taking the sales tax deduction, since they may have low incomes in tax policy terms even if the amount they make is comparable to or greater than that typical of salaried workers.

The self-employed who qualify for Medicare have a unique opportunity to deduct the cost of premiums for some Medicare coverage as well as supplemental policies, even if they are not itemizing deductions.

Investors who have their mutual fund dividends automatically invested in further shares often forget to account for their increased tax basis in the fund, according to the source, resulting in greater effective taxes on capital gains when they redeem shares.