Federal Tax Deductions

A tax deduction is a feasible and  convenient way to reduce a person’s taxable income. The total deductions are  subtracted from the taxable income to devise the total tax bill, for a complete  financial year. Although, tax credits are similar in nature to the tax  deductions, they decrease tax bill dollar-to-dollar.

Different Kinds of Federal Tax Deduction

Most tax professionals advise their clients to claim every kind of tax deduction that applies to them, to reduce the amount of money allocated for taxes, in a substantial way. According to the experienced tax preparers and accountants, at the EB Tax Consultants in Brooklyn, NY, here are some of the different types of tax deductions that you can apply for.

• Tax Deductions for Life-Changing Events
• Tax Deductions for Families and Parents
• Tax Deductions for Homeowners
• Tax Deductions for Employees/Workers
• Medical Tax Deductions
• Student Tax Deductions
• Charity Tax Deductions
• Standard Deduction and Itemized Deductions
• Tax Deductions for Car and Travel
• Tax Deductions for Teachers, Educators
• Miscellaneous/Other Tax Deductions

However it is important to note that for the deduction to be applicable, your expenses have to occur during the taxable year, up to 31st December. A good tax preparer will enlighten you about the circumstances or life situations, which will make them accessible to you. There are certain things that cannot be, in any circumstances, be deducted from your taxes. These include things like home repairs and political contribution or funding.

Tax Deduction for Life Changing Events

The experts, employed at the EB Tax Consultants accounting firm in Brooklyn, NY, claim there are certain life-changing, explicit conditions that make you eligible for special kinds of federal tax deductions. If you identify any one of them to be applicable to you, it can help you save substantial sums, while paying your tax bills.

• If you lost your job recently, you will be able to cash in your job loss expenses, because they can be tax deductible.
• Are you looking for a new job? If yes, then the job search expenditure is directly tax deductible.
• Marriage is also another life changing event that makes you eligible for tax exemption.
• Getting divorced or separated, from your spouse, is also guaranteed to modify your tax returns
• If you became a parent, in the last fiscal year, or you have other dependents, you can translate them directly into tax deductions. The same rules apply when you adopt a child. Adoption expenses are tax deductible.
• If you recently got admission in a college, you can except yourself from federal taxed on the basis of educational expenses.
• Another life changing event, that will directly eliminate or reduce tax bills, is becoming a home owner. This must be welcome news for homeowners all over America, who bought a home in the last fiscal year.

Having full knowledge about the above mentioned guidelines is very important. Although, most of the time becoming an expert on the matter in a short amount of time is neither required nor feasible, because a good CPA will help you understand the technicalities of the process of applying for these exemptions.

Federal Tax Deductions for Parents and Families

You can claim tax deduction against your status as a parent or a guardian. If you have children and dependants, it can help you reduce your tax bill.

Federal Tax Deductions for Homeowners

Home owners can benefit a lot from tax deductions in the form of real estate taxes, canceled debts, mortgages interests, energy efficient or home improvement installation interest costs or having a home office.

Federal Tax Deductions for Working

Taxpayers, who are employed or self employed, can avail tax deductions. They can also claim tax credit if they contribute or sign up for a retirement policy.

Federal Tax Deductions for Medical and Health Expenses

According to the leading accounting agency EB Tax Consultants, in Brooklyn, NY, if you have medical expenses, like health insurance premiums, you are eligible to apply for tax deduction from federal taxes. As they can cost upward to 7.5% of your gross income, availing deduction of health savings account can help you save considerable amount of money.

Federal Tax Deductions for Charity

The government allows you to include most of your charitable donations into the tax deduction list. Even if you used your vehicle for a charitable purpose, you are eligible to apply for exemption on the expenses accrued in the process.

Federal Tax Deductions for Education

If you are paying student loans, you will be exempted from some federal taxes. Moreover, teachers and educational experts can avail the deduction on educator’s expenses. There are two types of tax credits that can be availed by students:

• American Opportunity Credit
• Lifetime Learning Credit

Federal Tax Deductions for Car/Travel

People, who use their car or other automotive/vehicle, for transportation purposes, regarding business, charity or medical reasons are exempted from federal taxes. Also if you are travelling out of town for business or buying an electrical or other environmental friendly car, you can avail deductions in your taxes.

Difference between Standard and Itemized Federal Tax Deductions

Standard deduction is a definite amount that can be extracted from your gross income and can subsequently reduce your taxable income. Its amount depends upon your filing status and following people are eligible to apply for it:

• US Citizens
• Resident Alien (Single or Married)
• Head of a Household

The amount of standard deduction is increased each year, to combat the economic effects of inflation.
 As opposed to the standard deduction, an itemized deduction is the expense that belongs to the category of allowable items in a predetermined list. These items include doctors’ bills, medical equipment purchases, medical insurance premiums etc., and in order to file a claim, proper documentation is required.

Difference between Tax Deduction and Tax Credit

Tax credit decreases the dollar-to-dollar liability and it cannot be reduce to an amount less than zero. In simple words, a taxpayer’s gross income tax liability is the amount of money that they are liable to pay before any credits become applicable. On the other hand, a tax deduction reduces the taxable income and is calculated by finding out the percentage of your marginal tax bracket.

To clear away any confusions and to find answers, regarding all your tax and accounting problems, contact us. Tax professionals and accounting experts at the EB Tax Consultants, in Brooklyn, NY, will help you with any problems and queries.