To determine what deductions you can take on your taxes, you should start with understanding what types of deductions are available. There are general deductions, which generally apply to all taxpayers, and itemized deductions that may be offered by the IRS. A deduction is an amount deducted from your gross income before any taxes are calculated.
When it comes to itemized deductions, there are four options: deducting a certain amount off of each dollar you earn; deducting a percentage of your earnings; claiming an exemption on one or more items allowed for each individual taxpayer; or claiming a standard deduction.
The standard deduction is an amount that each taxpayer is allowed to deduct from their gross income. If you have income from sources other than wages, such as losses from selling property or goods, you may be able to deduct these items. For example, if you have a capital loss of $500 and $20,000 in wages for the year, your taxable income would be $19,500. This can often reduce or eliminate your tax liability.
If you have lost money over the years on investments or other ventures and incurred losses on real estate sales or casualty losses of certain possessions, this can also reduce your gross taxable income to a level at which it is not necessary to add any additional deductions. The amount of your standard deduction is $5,700 for single taxpayers. ($7,300 for married taxpayers filing jointly.)
The amount of your itemized deductions can be reduced by certain personal exemptions allowed to individuals according to the number of dependents they have. For example, if you are married and have one child, you may be able to claim an exemption for $1,300 a year on your income tax return. If you have two children you could deduct $2,400 from your gross income regardless of how much other money you make. In general it does not matter whether or not the exemption is claimed on a federal income tax return or a state tax return as long as it is claimed in the correct amount on both returns.
When it comes to itemized deductions, there are four options: deducting a certain amount off of each dollar you earn; deducting a percentage of your earnings; claiming an exemption on one or more items allowed for each individual taxpayer; or claiming a standard deduction.
The standard deduction is an amount that each taxpayer is allowed to deduct from their gross income. If you have income from sources other than wages, such as losses from selling property or goods, you may be able to deduct these items. For example, if you have a capital loss of $500 and $20,000 in wages for the year, your taxable income would be $19,500. This can often reduce or eliminate your tax liability.
If you have lost money over the years on investments or other ventures and incurred losses on real estate sales or casualty losses of certain possessions, this can also reduce your gross taxable income to a level at which it is not necessary to add any additional deductions. The amount of your standard deduction is $5,700 for single taxpayers. ($7,300 for married taxpayers filing jointly.)
The amount of your itemized deductions can be reduced by certain personal exemptions allowed to individuals according to the number of dependents they have. For example, if you are married and have one child, you may be able to claim an exemption for $1,300 a year on your income tax return. If you have two children you could deduct $2,400 from your gross income regardless of how much other money you make. In general it does not matter whether or not the exemption is claimed on a federal income tax return or a state tax return as long as it is claimed in the correct amount on both returns.
