Knowlopedia
Valued Contributor
- Credits
- $0.37390
There are many types of tax relief available to taxpayers. Some of the most common types include:
1. Standard Deductions: The most common type of tax relief is the standard deduction. This is an amount that you can deduct from your income, regardless of your filing status. For the 2018 tax year, the standard deduction is $12,000 for single filers and $24,000 for married couples filing jointly.
2. Itemized Deductions: If your deductions exceed the standard deduction, you may be able to itemize them on your tax return. This can provide significant tax savings, but it requires more record-keeping and paperwork. Common itemized deductions include mortgage interest, state and local taxes, and charitable donations.
3. Tax Credits: Tax credits are even better than deductions because they reduce your tax bill dollar-for-dollar. The most common tax credit is the Earned Income Tax Credit, which is available to low- and moderate-income taxpayers. There are also credits available for things like education expenses, adoption costs, and energy-efficient home improvements.
4. Tax-Exempt Income: Some types of income are completely exempt from taxation. This includes things like life insurance proceeds, child support payments, and certain types of disability income.
5. Capital Gains Exclusions: If you sell investments such as stocks or mutual funds, you may be subject to capital gains taxes. However, there are a number of exclusions and deductions that can reduce or eliminate this tax.
6. Retirement Account Contributions: Contributions to qualified retirement accounts such as 401(k)s and IRAs are typically deductible (or pretax in the case of Roth accounts). This can provide significant tax savings, especially for those in higher tax brackets.
7. Business Expenses: If you run a business, you may be able to deduct a wide variety of business expenses. This includes things like office supplies, travel expenses, and marketing costs.
8. Educational Expenses: There are a number of tax breaks available for educational expenses. This includes the American Opportunity Tax Credit, which can provide up to $2,500 in tax relief for qualifying expenses.
9. Health Savings Accounts: If you have a high-deductible health insurance plan, you may be eligible to open a health savings account (HSA). Contributions to this account are tax-deductible, and the money can be used to pay for qualified medical expenses.
1. Standard Deductions: The most common type of tax relief is the standard deduction. This is an amount that you can deduct from your income, regardless of your filing status. For the 2018 tax year, the standard deduction is $12,000 for single filers and $24,000 for married couples filing jointly.
2. Itemized Deductions: If your deductions exceed the standard deduction, you may be able to itemize them on your tax return. This can provide significant tax savings, but it requires more record-keeping and paperwork. Common itemized deductions include mortgage interest, state and local taxes, and charitable donations.
3. Tax Credits: Tax credits are even better than deductions because they reduce your tax bill dollar-for-dollar. The most common tax credit is the Earned Income Tax Credit, which is available to low- and moderate-income taxpayers. There are also credits available for things like education expenses, adoption costs, and energy-efficient home improvements.
4. Tax-Exempt Income: Some types of income are completely exempt from taxation. This includes things like life insurance proceeds, child support payments, and certain types of disability income.
5. Capital Gains Exclusions: If you sell investments such as stocks or mutual funds, you may be subject to capital gains taxes. However, there are a number of exclusions and deductions that can reduce or eliminate this tax.
6. Retirement Account Contributions: Contributions to qualified retirement accounts such as 401(k)s and IRAs are typically deductible (or pretax in the case of Roth accounts). This can provide significant tax savings, especially for those in higher tax brackets.
7. Business Expenses: If you run a business, you may be able to deduct a wide variety of business expenses. This includes things like office supplies, travel expenses, and marketing costs.
8. Educational Expenses: There are a number of tax breaks available for educational expenses. This includes the American Opportunity Tax Credit, which can provide up to $2,500 in tax relief for qualifying expenses.
9. Health Savings Accounts: If you have a high-deductible health insurance plan, you may be eligible to open a health savings account (HSA). Contributions to this account are tax-deductible, and the money can be used to pay for qualified medical expenses.
