4 major tax deductions most Americans foolishly pass up

Many taxpayers are apparently giving Uncle Sam more of their hard-earned money than necessary.

Americans are not taking advantage of some big tax deductions that they believe to be illegal, according to a recent NerdWallet survey.

More than 2,000 adults in the U.S. were polled for the survey, which was conducted by Harris Poll.

The survey identified several valid federal income tax deductions that few folks claim. Specifically, only 16 percent of Americans who have filed taxes have taken advantage of any of these methods for landing — or increasing — a deduction:

  • Making an extra mortgage payment
  • Contributing to a traditional IRA after Dec. 31 but before the tax deadline (which is April 17 this year)
  • Delaying income to the next tax year
  • Combining a vacation with a business trip and then deducting the unreimbursed business expenses

Let’s take a closer look at one of those deductions available to many people — because you could be losing out on a lot of savings if you are eligible but pass it up. 

RELATED: Check out the U.S. states where Americans pay the most in income taxes:

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States where Americans pay the highest in state income taxes
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States where Americans pay the highest in state income taxes

California

State income tax: 1% to 13.3% 

Maine

State income tax: 5.8% to 10.15%

Oregon

State income tax: 5% to 9.9%

Minnesota

State income tax: 5.35% to 9.85%

Iowa

State income tax: 0.36% to 8.98%

New Jersey

State income tax: 1.4% to 8.97%

Vermont

State income tax: 3.55% to 8.95%

Washington, DC

State income tax: 4% to 8.95%

New York

State income tax: 4% to 8.82%

Hawaii

State income tax: 1.4% to 8.25%

Wisconsin

State income tax: 4% to 7.65%

Idaho

State income tax: 1.6% to 7.4%

South Carolina

State income tax: 0% to 7%

Connecticut

State income tax: 3% to 6.99%

Arkansas

State income tax: 0.9% to 6.9%

Montana

State income tax: 1% to 6.9%

Nebraska

State income tax: 2.46% to 6.84%

Delaware

State income tax: 2.2% to 6.6%

West Virginia

State income tax: 3% to 6.5%

Georgia

State income tax: 1% to 6%

Kentucky

State income tax: 2% to 6%

Louisiana

State income tax: 2% to 6%

Missouri

State income tax: 1.5% to 6%

Rhode Island

State income tax: 3.75% to 5.99%

Maryland

State income tax: 2% to 5.75%

North Carolina

State income tax: 5.75%

Virginia

State income tax: 2% to 5.75%

Oklahoma

State income tax: 0.5% to 5.25%

Massachusetts

State income tax: 5.1%

Alabama

State income tax: 2% to 5%

Mississippi

State income tax: 3% to 5%

Utah

State income tax: 5%

Ohio

State income tax: 0.495% to 4.997%

New Mexico

State income tax: 1.7% to 4.9%

Colorado

State income tax: 4.63%

Kansas

State income tax: 2.7% to 4.6%

Arizona

State income tax: 2.59% to 4.54%

Michigan

State income tax: 4.25%

Illinois

State income tax: 3.75%

Indiana

State income tax: 3.3%

Pennsylvania

State income tax: 3.07%

North Dakota

State income tax: 1.1% to 2.9%

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NerdWallet found that 75 percent of folks believe it’s illegal to claim a tax deduction for contributing to an IRA after the end of the 2017 calendar year, but before the end of the tax year. Contributions to Roth IRAs are not tax-deductible but those to traditional IRAs are legally deductible, provided you follow the IRS’ rules for the deduction.

In fact, putting money in a traditional IRA any time before the 2017 tax deadline can lower your household’s 2017 taxable income by up to $6,500 per person.

Additionally, it can help you build up retirement savings. If you are just getting started building a nest egg, check out:

For more news and tips for the current tax-filing season — including other legal deductions — check out our 2018 tax coverage.

What’s your take on this news? Were you aware that the five above deductions are legitimate? Let us know below or on our Facebook page.

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