Don't Believe These 12 Common Tax Myths
To say the U.S. tax system is confusing is an understatement, so it's no wonder there are many misconceptions about the rules. The good news is that most people make less than $100,000 in a year and have no income other than their paychecks, so they can fill out the comparatively brief and very direct short form; almost everyone who uses the 1040EZ can fill it out themselves. For everybody else, though, the baffling mysteries of the tax code prevail, and can ultimately cost money. To help unravel some of the perplexities of the system, here are 12 common tax myths debunked. It might save money and sanity when the deadline rolls around.
Investors who lose a lot of money might figure they can deduct those losses against their income and not have to pay anything. Well, maybe. First of all, to take any deduction at all, the stocks have to be sold, making them a capital loss. And while it is possible to deduct capital losses, $3,000 is the maximum. That's usually not enough to cancel out other taxes. Capital losses over $3,000 per year can be carried over to other years, though, and deducted against either capital gains or income.