Twelve Tax Myths... Page 2
continued
Myth #7
It's smart to get as many tax deductions as possible.
Most people pay less than a third of their income in income taxes, and so a tax deduction
will only save a fraction of what it costs. Don't put off refinancing your home because
you don't want to lose the higher interest deduction, and pay off that mortgage if it
makes economic sense to do so.
Myth #8
A pay raise can actually cost you money because it pushes you into a higher
bracket.
Indeed, you may jump into a higher bracket, but that is only for your income in excess of
a certain amount. The income you earn below that amount will continue to be taxed at the
lower tax brackets you are used to.
Myth #9
Tax-exempt income will never be taxed.
Gotcha! Some states tax income that is exempt from federal taxes, and tax-exempt income,
though not taxed itself, may form an income platform that causes a greater portion of
other income, such as Social Security benefits, to be taxed.
Myth #10
You can use cancelled checks to prove that you gave money to charity.
The law changed a few years ago, and now you must have a written acknowledgment from the
charity of your gift of $250 or more. By the way, did you know that WIFE is a charitable
organization, and so all of your gifts to us are tax-deductible!
Myth #11
Forget about making an IRA contribution if you have a retirement plan at work.
Definitely not true. If your income is below $35,000 all or part of your IRA contribution
is deductible. If your income exceeds that amount, you can still make non-deductible
payments into your IRA,
Myth #12
All the taxes you pay are tax-deductible.
True, you can deduct property taxes, and your state income tax is a deduction on your
federal tax return, but not vice versa.
But you get no deduction these days for sales tax or gas tax. The only portion of your
vehicle registration that is deductible is the portion that is personal property tax.
The Women's Institute for Financial
Education (WIFE) is a non-profit organization which provides financial education,
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