0
Does an expenditure that is classified as a deduction from adjusted gross income produce the same tax benefits as an expenditure that is classified as a deductions for adjusted gross income?
Wiki User
∙ 12y ago
You should review your Q...there is no difference in what your asking.
Wiki User
∙ 12y ago
Add your answer:
Earn +20 pts
Federal Tax Deductions?
Federal tax deductions are items subtracted from the taxpayer' gross income and are not factored in calculating the income tax of the taxpayer. There are dozens of available deductions for many taxpayers, depending on their income bracket and how their income was used throughout the year. Unlike tax credits, deductions are utilized before the tax is calculated For example, an individual earns $50,000 per year, and is eligible for a $5,000 IRA tax deduction. The taxable income of the taxpayer is reduced by $5,000 and the tax is calculated on the remaining $45,000 of income. Because the US tax system is progressive, with higher tax brackets as income increases, the deduction is worth more in real dollars for someone in a higher tax bracket. Thus, the $5,000 deduction is worth $1,250 for someone in the 25% tax bracket ($5,000 X .25 = $1,250) as opposed to a tax savings of $750 for someone in the 15% bracket. Some federal tax deductions may be taken regardless of other deductions made by the individual, others can only be taken if the individual's total deductions exceed their Standard Deduction. The standard deduction is the minimum deduction allowed for all taxpayers. The IRA deduction, stated above, can be taken by anyone, regardless if they itemize their deductions. Other deductions of this type are student loan interest deductions, alimony paid, contributions to a health savings account and deductions for health insurance premiums by a self employed individual. Deductions for mortgage interest paid, most state taxes paid charitable deductions, medical expenses exceeding 7.5% of adjusted gross income, theft and casualty losses, and certain job expenses are examples of the latter type of deductions. They are reported on Schedule A. They may only be used if the total of all of the deductions of this type exceed $5,800 for a single taxpayer and $11,600 for married persons filing jointly. Though a person may itemize, if their deductions do not exceed the standard deduction rates, they are better off using the standard deduction. There are other deductions available to those who qualify. Certain taxpayers may be able to deduct the cost of operating a vehicle when it is used for company business or education expenses for some. Businesses and corporations have many more deductions available. However, these deductions are often geared to the cost of doing business, and attempt to separate gross profit from net profit. Thus, businesses will be able to utilize deductions such as fuel costs, utilities, depreciation, cost of labor, etc. A self employed individual is normally permitted to utilize many of these deductions.
What is the formula for taxable income?
Gross Income - Above the Line Deductions = Adjusted Gross Income - (Deductions +Exemptions)= Taxable Income
What is the formula for calculating taxable income?
Gross Income - Above the Line Deductions = Adjusted Gross Income - (Deductions +Exemptions)= Taxable Income
Income Tax Deduction?
The term "tax deduction" is often heard around the tax-filing season, but it's frequently misunderstood or confused with a tax credit. A tax deduction is a set amount you're allowed to subtract from your income. Unlike a credit, a tax deduction doesn't directly reduce the tax you owe and isn't refundable. However, a tax deduction typically results in a lower amount of taxes due, as the deduction amount subtracted from your earnings lowers the amount of income you're taxed on. The Internal Revenue Service has tax deductions available for various expenses and situations. Common deductions include the interest you paid on a home mortgage loan, property taxes you paid on real estate you own, the value of charitable donations you made and your out-of-pocket dental and medical costs. The size of the deduction depends on the deduction type and the method the IRS uses to calculate the amount, and some deductions have special rules. For example, when calculating the deduction for medical or dental expenses, you only are allowed to deduct expenses that exceed 7.5 percent of your adjusted gross income. Before you take any tax deductions, read the instructions for the deduction from the IRS carefully. You'll need to fill out the necessary forms, give the IRS documentation (if required) and submit the forms and documents with the return you're taking the deductions on. Taking any deductions you're not entitled to can result in tax penalties, and you'll owe interest on any taxes you didn't pay at the time because of the erroneous deduction. Keep all paperwork you used to calculate your deduction--such as proof of payment of medical expenses--so you'll have proof of your right to take the deduction should the IRS audit your return. If you're not sure whether you qualify for a particular tax deduction, contact a tax professional or the IRS taxpayer assistance line before trying to file using the deduction to avoid making a costly mistake.
Consider Medical Expenses?
When you are filing free taxes, be sure to consider every possible deduction for which you qualify. Deductions are what allow people to avoid having to pay heavy taxes. One deduction that people frequently miss out on is a medical expense deduction. If your medical expenses total more than 7.5% of your total adjusted gross income, then you will be able to qualify for a deduction on medical expenses. You will be able to write off any expenses associated with your medical care, such as traveling to and from doctor's appointments and the purchase of any medical equipment for your treatments.
Is the interest on a home loan tax deductible?
Maybe, it will depend upon if you have enough itemized deductions to exceed the Standard Deduction andyour adjusted gross income is less than $100,000.The Standard Deduction is an deduction from income based upon your filing status. The Standard Deduction is normally adjusted each year for inflation.In tax year 2011 the Standard Deduction for single or married filing separate was 5,800 and for married filing jointly was $11,600.So to be able to deduct every dollar of the interest on your home loan, you will need to have other Schedule A Itemized Deductions that exceeded your Standard Deduction.In other words, if your qualified medical expenses, state and local income taxes, home real estate taxes, charitiable contributions, casualty losses, education expenses, investment expenses, and legal expenses add up to be more than your Standard Deduction ($11,600 for married filing jointly) AND youradjusted gross income is less than $100,000 (married filing jointly) the interest on a home loan will be tax deductible.
Above the Line Deductions?
It’s tax season once again. If filing your taxes is not yet on your mind, it soon will be. So let’s get this tax season underway by discussing something that can save you money in your dealings with the IRS, Above the Line Deductions. Above the Line Deductions, so called because they appear on the tax form above the line where your Adjusted Gross Income (or AGI) is calculated, are deductions that the IRS allows to be taken into account in the AGI calculation. Since your AGI is used to determine your overall tax liability, Above the Line Deductions can have a larger impact on your tax situation than any deduction that occurs below the line. A few examples of Above the Line Deductions include certain business expenses, contributions to traditional IRAs, alimony payments, interest on student loans, job-related moving expenses, contributions to health savings accounts, and several others. If you qualify to take an Above the Line Deduction it is in your benefit to do so. Not only will it impact your tax liability directly, it also might make you more easily qualify for a below the line deduction that you wouldn’t otherwise be able to take. For example, since the deduction for medical expenses, a below the line deduction, is subject to those expenses that are above 10% of your AGI. Since AGI is reduced by an Above the Line Deduction the result would be a lowered threshold for claiming medical expenses. Another benefit to Above the Line Deductions is that it’s not necessary to itemize deductions on Schedule A in order to claim them. So they’re available to anyone, no matter how allergic you happen to be to extra schedules. For more information on Above the Line Deductions, please see IRS publication and remember to always consult a tax expert for tax advice appropriate to your specific situation.
Can dental bills be deducted on income tax return?
Yes, if you itemize deductions on Form 1040 Schedule A, but the deduction may be limited to zero if your adjusted gross income (AGI) is high and your deductible expenses are low.For example, if your AGI is $40,000 and your medical and dental expenses are $4,000, your deduction will be limited to $1,000: $40,000 AGI x 7.5% = $3,000 threshold. $4,000 expenses minus $3,000 threshold = $1,000 deduction.See the attached link for a list of expenses that qualify for the medical and dental expense deduction.
Do you have to itemize to get a deduction for hearing aids?
You have to itemize your medical expenses in order to get a deduction for hearing aids. Then you only get to deduct the amount of medical expenses that are above 7.5% of your adjusted gross income.
What is Gross income after certain deductions are calculated is called?
I suspect you're talking about AGI, Adjusted Gross Income.
A Select List of Tax Deductions?
OverviewIndividual taxpayers, as opposed to businesses, have two general lists of tax deductions available. The first group consists of deductions that can be taken without regard to meeting the standard deduction and are not listed on Schedule A. The second group consists of those that must be itemized on Schedule A. This second type will not be used if the total does not exceed the standard deduction.This is only a partial list of the tax deductions available. It represents some of the most commonly used deductions.Mortgage DeductionThis is an itemized deduction. The taxpayer can deduct mortgage interest, points, and mortgage interest premiums. Some limits may apply to the allowable deduction based on the purchase price of the property, and the expenses must be related to the taxpayer's primary or secondary residence.IRA ContributionThis is not an itemized deduction. As much as $6,000 is available per person (taxpayer and spouse) when filing jointly, but the IRS applies several tests based on income and circumstance that can reduce the deductible amount.Charitable ContributionsThis is an itemized deduction. Contributions must have been made to an IRS-qualified organization. Donations of cash, property, and out-of-pocket expenses are potentially eligible and must be documented. Limits apply based on adjusted gross income, but donations not deductible in one year can be carried over to the next.Educational ExpensesThis is not an itemized deduction. Qualified student loan interest, tuition, and fees can be deducted, although limits might apply based on the modified adjusted gross income. These deductions should not be confused with education credits. Each program has its own rules, and the taxpayer should calculate his tax liability under both methods to determine which gives the better result.Medical ExpensesThis is an itemized deduction. Allowable medical and dental expenses are described in IRS Publication 502. Only those expenses that exceed 7.5 percent of the taxpayer's adjusted gross income can be deducted. The taxpayer may deduct the expenses paid for herself, her spouse, dependents claimed on her return, a child not claimed on her return, and certain other non-dependents.State and Local TaxesThis is an itemized deduction. State and local income, sales, personal property, and real estate taxes can all be deducted on the federal tax return.
Find ajusted gross income from w-2?
You W-2 form is not where you will find your adjusted gross income. The W-2 form is only to report your income from one particular job along with deductions for federal and state taxes that were deducted from your earnings as well as some other items such as 401K and Insurance programs you paid for through payroll deduction. Your Adjusted Gross Income is located on your Tax Return form 1040, 1040A, or 1040EZ.
