On this episode of the Finance Flash Go! podcast, we’re going to discuss tax deductions. More specifically, I'm going to share how to make tax deductions your best friends!
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Tax deductions are a form of a tax break.
Essentially, a tax deduction lowers the amount of a person's taxable income. In this way, the amount of income that you are taxed on in that given year is less. Thus you pay less taxes.
The amount that a tax deduction saves you in taxes is equal to the whole sum of your deductions multiplied by your marginal tax rate.
Some tax deductions are able to be taken directly from your taxable income. These are “above the line” deductions or income adjustments.
Other tax deductions only can be counted if, when summed up, they are greater than the defined “standardized deduction” for that given tax year. If they total less than this, it is better to take the standarized decution which in this case would be greater.
Mortgage interest payments, property taxes, job related expenses, healthcare costs and other payments are eligible for tax deductions.
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