A tax deduction is intended to lower an individual's taxable income and the amount he has to pay for his taxes. A taxpayer should sit down with a certified accountant early in the year in order to determine if he is eligible for any tax deductions.Continue Reading
Examples of tax deductions include above-the-line deductions, standard deductions and itemized deductions. Above-the-line deductions are subtracted from an individual's gross income and are a deduction anyone who completes a Form 1040 can claim.
Standard deductions are determined by a taxpayer's filing status and are subtracted from his annual gross income. Examples of such deductions include head of household, married filing jointly, single, eligible widow and married filing separately.
Itemized deductions are determined by specific purchases that can affect an individual's tax status. Examples of itemized deductions include charity, casualty and theft, self-owned business, personal property tax, gambling losses, and student loan interest that's paid by an individual's parents.
If a taxpayer has more in itemized deductions than he does in the standard deductions he usually claims, it's better that he only claim itemized deductions. If his available standard deductions are more than his itemized deductions, a taxpayer is better off only claiming standard deductions.Learn more about Income Tax