Federal income tax deduction is a term that probably everyone has heard before. But what is an actual federal income tax deduction? Income tax deductions are a legal requirement for the United States tax law. If you are a U.S. citizen, and fall into an income tax bracket, you are required to pay the federal income tax deduction. To calculate your individual federal income taxs, you deduct all exemptions and allowable income tax deductions from your annual gross income.
There are a few exemptions from having to pay the tax deduction. These include any money from life insurance earned, any money from gifts or inheritances, money from any personal injury settlements, and any interest earned on state or municipal bonds. There are some considerations when trying to take advantage of any of these exemptions in regards to the income tax deduction, so it is best if you have a tax preparer help you to decide with tax deductions you can pay, and which you cannot.
There are additional tax deductions that may reduce your federal income tax liability. The standard tax deduction is just one of many available federal income tax deductions. Consulting with J.M. Trippon & Company CPAs is a great way to learn all of the tax deduction options available. The following is a partial list of legal tax deductions that can be taken: trade and business expenses, alimony, IRA contributions, net capital losses and any money used on property that is used to generate an income.
There are federal income tax deductions that are income related. For example the alternative minimum tax. This tax deduction can be taken if your income exceeds a certain amount. Consulting with your tax CPA will clarify if you qualify for this tax deduction.
There is one last option for almost anyone; to paying the federal tax deduction straight out and this itemized deduction. This can include state and local income and taxes, donations to charity, employee transfer costs, medical expenses, casualties and any loss that may have been incurred from this and any interest paid on mortgages. Itemized deduction can be a bit more of a hassle than it’s worth though, depending on how many of these you qualify for, so check with your tax preparer ahead of time.
In the end is up to you whether or not you will go with just the standard deduction or with a more detailed one such as itemizing. But either way, at least now you hopefully will have a better understanding of some of things involved with a federal income tax reduction.
Taking advantage of federal income tax deduction is perfectly legal, as long as you qualify for the tax deduction. The consequences can be very harsh if you claim a deduction that you are not elligible for. This could lead to an IRS audit, penalties and interest and in extreme cases criminal charges.
To learn which federal income tax deductions you qualify for, and to seek opportunities to legally reduce your tax liability, please call J.M. Trippon & Company CPAs to schedule your FREE tax evaluation at 713-661-1040.