What are the most common federal tax deductions and who is eligible for them? Read on to find out this and other interesting tax information.
Federal income tax deductions make you pay less taxes by reducing your taxable income and this will ultimately reduce your tax. How much tax you save with a tax deduction will depend on what your tax bracket is. The higher tax bracket you are in the more taxes you will save.
There are three different kinds of federal tax deductions on an individual tax return:
This type of federal tax deduction is only available if you have a business. Here you can deduct all expenses related to your business.
This deduction has the most value because it does not only lowers your federal and state taxable income. It will also lower your social security tax.
If you have a rental property you can also deduct the expenses of the property. This will not lower your social security tax since you do not pay this tax on the income from the rental property either.
Here you can deduct a variety of tax deductions that you can deduct even if you don't itemize deductions.
See this list of common tax deductions you can deduct by adjustments:
If you are self employed you can also deduct:
There are various federal income tax deductions you can take before
calculating your taxes. Personal exemptions can be taken for yourself,
your spouse, and your dependents.
See what income tax exemptions you can take.
Every tax return also gets a basic federal tax deduction . You can choose to take a standard deduction or itemize the deductions yourself.
The standard deduction is a preset amount which depends on your filing status. It can also be increased if either taxpayer is over 65 or legally blind.
Itemized deductions are calculated on Schedule A and include certain expenses like medical expenses, mortgage interest, charitable contributions, certain taxes, and more.
It only pays to itemize deductions if the total itemize deductions are more than the standard deduction. (Please note: Some people must itemize even if they don't want to. For example if your spouse itemizes on a separate return or you were a dual-status alien)
Tax deductions are just one way you can reduce your taxes. Check out the various tax credits available like:
Updated January 6, 2014
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