Tax Deductions for Individuals

Scholasticus K Jan 18, 2019
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Tax is a fee collected by governments across the globe. Tax deductions for individuals include certain categories of income and expenditures that are not taxed by the government.
With the fiscal year drawing to a close, individuals, and organizations - all the same - have started to wind up their books of accounts, and calculate their tax liabilities. A majority have screened their sets in order to file for tax returns. A factor often ignored by aplenty in such situations is that of tax deductions.

What is Tax Deduction

A tax deduction is nothing but an exemption provided by the government from a stipulated amount of tax levied. There are several taxes payable, called for, by the government at the end of the financial year. Some of the income and expenditures of people however, are not taxed by the government.
These common deductions are taken into consideration by the government while levying income tax on the common man. The Internal Revenue Service (IRS) of the United States of America has specified some standard deductions, and itemized deductions for the tax payer's benefit.
The standard deductions, and itemized deductions are the principal deductions for US citizens. To sum up it can be stated that deductions are exemptions granted by the government for an individual's income and expenditure; thereby, affecting the taxpayer's income tax return.

Standard Tax Deductions

The IRS has made provisions for deductions that fall under the category of standard deductions. The concept of standard deductions is specified in the Topic 551 of the irs portal. A standard tax deduction is basically an amount in dollars that reduces the amount of income meant to be taxed.
One cannot avail the standard tax deductions for individuals if one chooses to avail the itemized deduction. Another twist in the story of standard deductions for a married couple is that both - the husband and wife - must file for standard deduction. Both the spouses cannot file for different deductions.
These sections qualify for standard tax exemptions:

  • Single, or a married person filing separately, qualify for standard deductions upto $12,000;
  • If you are married, and filing jointly, or a widower or widow, you are eligible for standard tax exemptions elevating up to $24,000;
  • In the case of head of household, you will qualify for a deduction worth $18,000.
The IRS has put forth certain exceptions for standard deductions. It is better that one avails and goes through the Publications 557, 547, 553, 519, and 501 of the IRS before actually claiming, and filing for the exemptions. You can also go through Form 1040A, 1040EZ, and Form 1040 in order to calculate the exemptions.
These publications work as virtual income tax calculators, and help you avail further exemptions. The mentioned figures are subject to change, with regards to the financial year, also conforming to the then existing rate of inflation.

Itemized Tax Deductions

There are several itemized deductions that are overlooked. Tax exemptions which are itemized in nature is the second type of deduction. According to the IRS norms, individuals availing an itemized tax deduction are not deemed eligible for filing for standard deductions. IRS topics 501 to 515 state the provisions for such itemized deductions.
These are some of the genuine itemized deductions:
  • Medical and Dental Expenses
  • Deductible Taxes
  • Home Mortgage Points
  • Interest Expense
  • Contributions
  • Casualty and Theft Losses
  • Miscellaneous Expenses
  • Use of Home and Car (business purpose),
  • Business Travel Expenses,
  • Entertainment Expenses,
  • Educational Expenses,
  • Employee Business Expenses,
  • Casualty, Disaster, and Theft Losses.

To avail these, you might as well refer to income tax forms and calculators made available by the IRS.
After reading these sections on standard, and itemized tax deductions, deriving a rough blueprint of what is considered deductible or itemized, respectively should not pose much trouble. A fundamental to be sapient about is to check the calculations of expenses incurred.
If you find that the sum total of expenses is escalating higher than the standard deduction, itemizing tax returns is the way to go. However, there are trends observed with individuals considering standard deductions, even when their calculations, and estimates display promissory indications with respect to itemizing their deductions.
The reason cited is that one has no pressures regarding claiming specific deductions. In addition, collecting tax receipts for availing deductions, subsequently, does not apply.
In case of you availing tax exemptions or deductions, provisions and topics by the IRS must be referred to; as every type of deduction has some or the other condition, provision or qualifying requirement. Consulting a tax attorney, or a certified chartered accountant may be considered imperative.