From TheStreet.com: Yes, it's time once again to embark on the ambitious task of deciphering the U.S. tax code.
Many taxpayers are bound to get tripped up by the accepted wisdom that gets recycled every tax season.
So we've put together a list of common tax myths. Debunking the standard school of thought will often help you get the most out of this year's tax return.
Myth No. 1. You make too much/not enough to contribute to get tax advantages from a traditional IRA.
Wrong. As long as you're employed, you make just the right amount.
You may earn too much to deduct your contributions, says James J. Holtzman an adviser with Pittsburgh-based Legend Financial Advisors, but there's no income cap on contributing to traditional IRAs. And, no matter your income, all earnings on the account are tax deferred, which make IRAs an attractive investment vehicle.
But be aware, though you'll qualify for a traditional IRA, if your income is above six figures, you may not be eligible for a Roth IRA. And some people who are unemployed may be eligible to contribute if their spouse is employed.Myth No. 2. If you're in the 20% tax bracket and you itemize, it's like the federal government pays a fifth of your deductible expenses.
As it turns out, Uncle Sam isn't nearly so generous.
You only get an added benefit for deductable expenses after your itemized expenses exceed the standard deduction--$5,380 for a single person without dependents.
So if you have $10,000 in deductable expenses, and are in a 20% tax bracket, you get back an extra $924 by itemizing: a discount of 9.24%.
It's nothing to sneeze at, but you're hardly getting a 20% discount. And if you're only able to itemize $6,000, you'd only get back an extra $132, an added 2.2%.