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Tax Deduction Dependency

October 10th

tax deductionMany of us count on certain tax deductions to lower our tax liability bill each year. While many of these deductions are in place to do just that, depending on them each year to produce a refund or keep us out of owing the IRS is not a good strategy.

Future Fallout

Some of the most notable tax deductions come from policies designed to help the economy flourish, or spur recovery in today’s market. The mortgage interest deduction and mortgage debt forgiveness relief are two examples. Many homeowners count on being able to lower their taxable income by the amount paid towards their mortgage loan in interest. For many people, this saves the hundreds of dollars each tax season.

Similarly, those struggling with mortgage debt and forced to engage in a short sale or foreclosure may have been given a waiver of the delinquency balance on the home once sold. Set to expire at the end of this year, the IRS may soon require people to claim this balance waiver as income on their 2013 tax return. Further, many people could be facing steep tax bills if these deductions aren’t renewed soon.

There are a handful of other deductions that people tend to rely on each year to help make tax time less of a financial burden. However, leaning on such volatile crutches could lead to serious tax debt problems if we aren’t careful. Instead, people should be reviewing their withholding levels and saving money, in the event they owe at the end of the year.

 

 
 
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