Tax Research on Itemized Deductions

[s]Tax Research on Itemized Deductions

Origin of deductions to income

The origin of the Income Tax or deductions to income can be traced back to the War of 1812. In the War, the US first considered enacting an income tax but the war reached to an end before it could be implemented. The American Civil War brought again the discussion and then creation of the first income tax but this was a step taken for a temporary period where there was a requirement of money for war. It was reverted in 1872 but in later part of the century the government starting thinking about finding a permanent solution to the even distribution of the federal tax burden and thus attention was diverted towards the permanent creation of Income Tax. With the passing of the 16th Amendment to the Constitution in 1913, the US government was able to pass its first, permanent income tax law in the same year.

Money raised through the income tax has been used over the years for programs, benefits and services provided by the government for the welfare of the citizens. Many services which include those of defense, inspections with regard to food safety, other federal benefits such as social security and medical are dependent on the tax deducted on income. In this manner, the deductions are to some extent meeting the goals for which they were created but there is still a sense of distance found between people and the government.

Itemized deductions

At the time of filing of taxes, there is a choice given to people to either take the standard deduction or itemizing the deductions. The standard deduction is a set amount that is deducted from the taxable income annually. On the other hand, itemized deductions allow deductions such as those adjusted from the gross income. Once they are subtracted from the income, the left over amount is the actual taxable income. Many taxpayers in the country are able to claim deduction on their tax returns by itemizing their deductions. This is an important aspect provided by the government in order to provide tax payers an incentive to do things such as purchase a house or donate money as charities.

Complexities in determining the itemized deductions

Itemized deductions may include many items on which deductions are made. The itemized deductions have several levels of complexity and this complexity in the tax laws makes it difficult for people to find and utilize the tax benefits and incentives. It is suggested that the fundamental reason for the complexity of the income tax code is the size of the document. It has an overwhelming size that makes it difficult for people to study and understand such voluminous amount of data. This pervasive complexity creates a barrier for tax payers. Moreover, there have been changes from time to time that contribute to increasing the size of the code and in increasing the complexity. This leads to perverse results such that people who are willing to pay or comply ...