If you’re dragging your feet on filing your income taxes, dreading you’ll end up paying a hefty bill to the government – don’t fret. You might be able to take advantage of a number of tax deductions depending on your individual situation.
Tax changes occur every year. New deductions emerge while some earlier ones aren’t being renewed for this year, so it’s important to stay up to date.
Deductions (assuming you qualify) include medical expenses and work-related expenses. There are also several tax credits you may qualify for if your income is within a certain range. While deductions and credits can reduce your income tax liability, they do so in different ways.
“Tax deductions reduce taxable income; their value thus depends on the taxpayer’s marginal tax rate, which rises with income,” according to the Tax Policy Center, a joint project of the Urban Institute and Brookings Institution.
“In contrast, tax credits directly reduce a person’s tax liability… [They] have the same value for all taxpayers with tax liability at least equal to the credit.”
You’ll benefit from the standard deduction, which is a set dollar amount that reduces your taxable income, if you qualify. That amount is typically adjusted for inflation every year. For 2014, the standard deduction for a single filer is $6,200. It amounts to $12,400 for married couples filing jointly.
If you don’t qualify for that, you can instead itemize your deductions. “A taxpayer will usually itemize deductions if it offers them more benefits than the standard deduction (i.e., when the amount of qualified deductible expenses totals more than the standard deduction),” according to the Internal Revenue Service.
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