Navigating the Complexities of the 73,000-Page U.S. Tax Code for Taxpayers: What’s Inside

NEW YORK :- The ongoing battle over which credits and deductions the U.S. government allows and which taxpayers can claim is a contentious and recurring struggle, repeated annually. Unfortunately, in recent times, it seems to be a one-sided contest. Taxpayers often lose ground by not paying close attention to the myriad tax breaks tucked away in the ever-expanding U.S. tax code, which ballooned to over 73,000 pages last year, compared to a mere 400 pages almost a century ago.

Rebecca Pavese, a certified public accountant and the director of the tax practice at Palisades Hudson Financial Group, a wealth management firm in Scarsdale, New York, is one of the advocates trying to level the playing field. She’s offering fresh tax deductions and highlighting some tried-and-true deductions that frequently go unnoticed by Americans.

Pavese points to recent changes by Congress and introduces several new tax breaks for Americans. These deductions fall under the category of “created, extended, or made permanent” by recent alterations to the U.S. tax code:

  1. Student-loan interest: You can now deduct voluntary interest payments, up to $2,500 yearly (subject to income phase-out limitations). This deduction is not limited to the first 60 months but can be claimed as long as you have the loan. The new law makes this change permanent.
  2. Cancellation of mortgage debt on a principal residence: If a lender forgave mortgage debt through 2013, it doesn’t have to be reported as income, providing relief to homeowners who benefited from home loan modifications.
  3. Donating land for conservation: Taxpayers who donated capital-gain real property for conservation purposes in 2012 can now deduct the contribution up to 50 percent of their adjusted gross income, an increase from the previous limit of 30 percent.
  4. Private mortgage insurance premiums: PMI premiums are now treated like qualified residential mortgage interest and are deductible. This deduction is often missed because PMI premiums have only recently become deductible. The new law made this temporary rule permanent.
  5. Child tax credit: The new law extends the child tax credit permanently. You can receive a $1,000 credit for each dependent child under 17. However, the credit starts to phase out for married couples with $110,000 of modified adjusted gross income or $75,000 for single taxpayers. The credit is reduced by $50 for each $1,000 of income above the threshold.

Pavese also highlights some overlooked deductions that many taxpayers miss:

  1. Moving expenses: You may be eligible to deduct qualified moving expenses if you relocated due to a job change or a new job.
  2. Adoption expenses: Money spent pursuing an adoption can be deductible. In 2012, the maximum tax credit for adoption expenses is $12,650 per child.
  3. Residential energy credits: Installing energy-saving windows, doors, insulation, and solar panels can lead to tax savings.
  4. IRA contributions: Some IRA contributions can be made after April 15. Deductible contributions to a standard IRA can be made until April 15, while contributions to a Simple IRA, SEP IRA, or Keogh plan can be made until you file your return. With an automatic extension, you can even file as late as October 15.

Claiming the tax benefits available to you is fair game for taxpayers. Utilizing Pavese’s advice can help ensure that you don’t miss out on what’s rightfully yours this tax season.

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