How Do Tax Deductions Work?

By mfishman

Standard Tax Deductions vs. Itemized Tax Deductions

The standard tax deductions for single taxpayers is $5,700, for married taxpayers filing for a joint return it is $11,400 and for the head of a household taxpayer it is $8,350. These tax deductions may increase if you are 65 years or older, because of additional deductions which you may get that amounts from $1,400 to $4,400.

On the contrary, if you choose to itemize your tax deductions then your tax deductions may increase since you can incorporate your property taxes, medical expenses, miscellaneous expenses, charitable donations and state and local taxes in it. Nevertheless, you need to be familiar with the proper formula in calculating for these tax deductions.

Specific Case Scenario

To better understand and appreciate the amount of savings that you may get if you itemize your tax deductions, here is a particular example.

Consider a married couple who owns a house and pays a monthly premium on it, plus government and city taxes. According to the standard tax deductions, they can only deduct $11,400 on their tax forms – but if they itemize, these then the tax deductions will increase, and the income taxes they will pay becomes smaller.

These deductions may include the wife’s maternity expenses, the husband’s annual physical examinations and the baby’s medications and treatment expenses. Deductions may also include the property taxes which are paid both from the city and state government. The couple may also deduct the amount of money which they donated to charity – as long as it is supported by a receipt or a canceled check.

In times like this, it is best to utilize all available avenues which will allow us to save money. Carefully planning your tax forms, and itemizing your tax deductions, is just one of the few ways that you can use to save money. It may be a little bit complicated but it is guaranteed to provide you ample with an amount of savings.

How Do Tax Deductions Work?

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