How to determine the best way to reduce your tax bill Many taxpayers choose most effective way way to do their taxes by filing an application form EZ. The problem generally this form only enables you to take the standard tax deduction thereby limiting your ability to get rid of your taxable income. Lower taxable income means a lower tax bill. By spending some extra time on top of your tax return by itemizing your deductions you may lower your taxable income effectively getting paid for the additional time. Standard Deduction The standard deduction can be a fixed amount thats automatically deductible from your adjusted gross income AGI.
The size of the deduction depends upon your filing status. The largest deductions go to those which file as Married Filing Jointly. incometaxindiaefiling changes each year and is increased based on cost of living variances. The standard deductions for the tax year are Remember that mind certain taxpayers arent eligible to take although deduction and must itemize. These taxpayers include nonresident aliens estates and partnerships. More taxpayers itemizing isnt a requirement but may benefit them financially.
Itemized Deduction Categories The IRS enables you to deduct specific expenses that number one of eleven basic deduction groups. Medical and Dental Expenses Deductible Taxes Bank loan Points Mortgage Interest Expenses Contributions Casualty Disaster and Theft Losses Business Associated with Home or Car Business Travel and Entertainment Expenses Educational Expenses Unreimbursed Employee Expenses Miscellaneous Expenses One way come across if an expense falls into one of these categories to be able to check the IRS website or the instructions for Form .
The easiest strategy is to use an online taxpreparation service. It will likely ask you pertinent questions related in the expenses and determine for you whether or not they are tax deductible. Once youve added up all your allowable expenses you should make the decision to itemize your deductions if overall is more than what your standard deduction would be. The only catch is you may be limited on the amount you can deduct based on your adjusted gross earning. Additionally if you are married filing separately you and your spouse must either both take the standard deduction or both of you itemize your deductions.