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Average Tax Deductions by Income

Posted By timparker On 03/14/2012 @ 2:09 pm In Personal Finance | 12 Comments

Do you ever wonder how your tax return compares to the average? Although your motivation may be nothing more than curiosity, there’s another reason why knowing the deductions that others claim in your income bracket could be important. Blending in may help you to avoid an audit [3].

Each year the IRS publishes the average amount of deductions by income bracket and for those with a noticeably higher amount of deductions than the average for their income level, the IRS may want to know why. Avoiding an audit may start with how well you blend in with other tax payers.

According to USA Today [4], the average household income is $49,445 but they also report that this average has continued to fall putting more Americans in to the lower income brackets. What are the average deductions in your income bracket? We’ve included the deductions for the average tax payer and a few  others.

$15,000 to $30,000

  • Medical Expenses- $7,074
  • Taxes-$3,147
  • Interest- $9,245
  • Charitable Contributions- $2,024

$30,000 to $50,000

  • Medical Expenses- $6,153
  • Taxes-$3,830
  • Interest- $9,055
  • Charitable Contributions- $2,189

$50,000 to $100,000

  • Medical Expenses- $7,102
  • Taxes-$6,050
  • Interest- $10,659
  • Charitable Contributions- $2,693

$100,000 to $200,000

  • Medical Expenses- $9,269
  • Taxes-$10,798
  • Interest- $13,734
  • Charitable Contributions- $3,754

If you’re earning more than $200,000 or want to see the average deductions for the top 1% of earners, you can view the full chart by clicking here [5].

Blending In

Sometimes the IRS sends you an audit notice [6] because of a random draw but often audits are a result of something that looks out of place on your return. If you’re completing your taxes without the help of a computer, first consider double checking your return with TurboTax or one of the other tax software packages but if you’re not, be careful with your math. Audit triggers are often the result of math errors.

Next, before submitting your return, look at how much in deductions you have in the above categories. The IRS pays particular attention to the charitable contributions category since it’s easy to exaggerate the value of donated items. If one donation exceeded $250, the IRS requires you to have a receipt. You can read more about the rules for charitable contributions here [7].

Include Legitimate Claims

It’s true that falling within the average deductions for your income group helps to shield you from an audit but some people have legitimate reasons to claim more than the average amount. If you have the necessary documentation to prove your deductions don’t pay more in taxes just to avoid being higher than the average. If you do find yourself outside the normal range, all income and deductions will need the appropriate documentation. The IRS will audit your entire return.

Bottom Line

Audits are only a problem for people who were less than truthful or incorrectly completed a portion of their return. Especially if your deductions are higher than the averages, have the appropriate documentation and if your return includes complicated items like a home office deduction, multiple businesses, complicated investments, or other special tax situations, it is best to find a qualified tax professional to help. Getting a second look at your return is cheap compared to the penalties and interest you could pay if you complete the forms incorrectly.


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[1] Tweet: http://twitter.com/share

[2] Email: mailto:?subject=http://www.bargaineering.com/articles/average-tax-deductions-income.html

[3] avoid an audit: http://www.bargaineering.com/articles/how-does-the-irs-pick-tax-returns-to-audit.html

[4] USA Today: http://www.usatoday.com/news/nation/story/2011-09-13/census-household-income/50383882/1

[5] here: http://www.cch.com/wbot2011/029AvgItemizedDeductions.asp

[6] audit notice: http://www.bargaineering.com/articles/irs-cp2000-clarification-letter.html

[7] here: http://www.irs.gov/newsroom/article/0,,id=106990,00.html

Thank you for reading!