5. Earned income tax credit
The earned income tax credit is available to workers who don't make much money. It was created to help offset the cost of Social Security payments. The credit is available to single taxpayers, but it pays more to taxpayers who support families. The credit also is refundable, which means that if a taxpayer doesn't owe any income tax, the filer could still get a refund from the IRS.
In recent years, the EITC has become a political lightning rod. Advocates say it encourages people to work. Opponents say the refundable aspect is particularly unfair to other workers who don't qualify.
But there's no argument over the tax credit's cost: an estimated $269 billion between 2010 and 2014.
6. State and local taxes
Some state and local taxes can help taxpayers reduce their federal tax bills. You'll find a place to write off these taxes on Schedule A, the form used to itemize deductions.
Filers can choose to claim state and local income taxes or sales taxes. Property taxes, usually the real-estate taxes homeowners pay to their county or parish tax collectors, also offer a nice tax deduction to many taxpayers.
All these state and local tax deductions are projected to cost Uncle Sam more than $237 billion.
7. Charitable donations
Americans are by and large a giving bunch. IRS data from the 2007 through 2009 tax years show that an average of 37 million taxpayers each year claim charitable deductions when they itemize on Schedule A. Donations can be cash, which in the IRS' eyes means money, checks or charges to credit cards. Or the gifts can be household goods, vehicles, appreciated assets or even the calculation of miles driven in doing charitable work.
These various gifts to qualified organizations -- for which the donor should have receipts -- help reduce taxable income, which means lower tax bills.
The donations also mean less money for Uncle Sam. Between 2010 and 2014, this deduction -- excluding donations for education and health -- will mean the U.S. Treasury will be out an estimated $182 billion. The amount would have been even larger, but congressional calculations didn't include donations to education and health care institutions.
8. Social Security, Railroad Retirement benefits
Retirees whose only income is Social Security or Railroad Retirement benefits usually don't owe federal taxes. However, the IRS gets a cut when a retiree has other income from, for example, a post-retirement job or investment earnings. Married retirees who file joint returns also must take into account any money earned by either spouse in determining whether any of the federal retirement payments are taxable.
In most cases when a retiree's additional earnings are large enough to attract IRS attention, up to 50% of federal benefits generally are taxable. However, in some situations a retiree could find up to 85% of Social Security or Railroad Retirement benefits taxed.
Still, plenty of benefit recipients escape taxation. They are expected to account for $173 billion in taxes that the U.S. Treasury won't collect between 2010 and 2014.
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