There are tricks to the tax trade, you just need a basic understanding of how things work before you can make smart decisions. The team at Broussard Poché, LLP wants to help with your tax preparation and planning by helping you grasp the basics. Personal deductions are one way you can save money come tax time, review what you need to know.
Deductions can help you pay less taxes
The real thing to know about deductions it that they will lower your taxable income. Basically, subtract certain deductions from your total income, this gives you your adjusted gross income (AGI). After determining your AGI, you then subtract other deductions to arrive at your taxable income.
There are two types
- Standard Deduction
The standard deduction is a deduction determined by the IRS every year for every taxpayer. The amount of the deduction depends on your filing status.
- Itemized DeductionItemized deductions are various items that you’ve paid throughout the year that the IRS lets you take advantage of on your tax return.
To figure out which deduction is right for you, we suggest that you add up the items you would use for the itemized deduction list then compare it to the standard deduction. The one that saves you the most money is the one you should choose.
Some of the most common allowable deductions are:
- Unreimbursed medical and dental expenses
- Real estate taxes
- Home mortgage interest
- Charitable contributions
- Casualty losses
- Sales taxes on major purchases
If you go the itemized deduction route, you’ll want to consider hiring a tax professional to help because these deductions are subject to limitations. The more items you have to deduct, the more complicated the calculations can become. Instead of accidently leaving money on the table, contact your financial expert.