Making Cents: A Little Deductive Reasoning

It is perfectly legal for itemizers to deduct all state taxes paid--including an overpayment--from a federal tax return. The refunded portion is taxable the following year, of course, but it is generally wise to delay taxes. However, pause if you expect to make more money and move up a federal tax bracket in 1997. The 1996 deduction is probably less valuable than the cost of the 1997 federal tax on the refund.

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