Paying taxes doesn’t have to be stressful, and with the right approach and understanding, you can save more money and feel good about not overpaying when tax season comes around. Several deductions exist for homeowners and people with children, along with many more that can prove beneficial to both employees and self-employed individuals alike.
Today’s tax code offers provisions such as the standard deduction, and claiming it may help you save thousands on taxes depending on your income and other potential factors. Taking advantage of today’s deductions and tools can mean big savings when it comes to paying taxes, and these opportunities will apply differently based on each individual and their current financial circumstances.
Understanding deductions and how they can help you pay less in taxes is an essential component of almost any tax strategy, but it isn’t always clear at first which deductions can help the most.
Several popular deductions exist that can reduce your taxes on things you already pay for anyway, such as having children or covering your property taxes, and more. Deductions have a direct impact on how much your income is taxed, and are usually related to business expenses but could also include family or living costs as well.
What Is the “Standard Deduction”?
Each year when a person pays their taxes, they have the option to choose to either take the standard deduction or itemized deductions. Which one to choose will depend entirely on how you file and which one will help you save the most money.
As implied by its name, the standard deduction is offered by the IRS on form 1040 as a general deduction that taxpayers can take rather than going through the process of listing each item to deduct, one by one. Due to recent legislation, the amount offered by the standard deduction has gone up considerably and will continue to rise year after year.
Your filing status will help to determine how much you will be able to deduct using the standard deduction, including if you are the head of the household, married or single, and of course, your taxable income bracket.
Making the Most of Itemized Deductions
Choosing to take itemized deductions over the standard deduction will require more work and often help from a qualified tax professional for many individuals. However, in some cases, it may allow you to save more money.
This approach involves “itemizing” line by line your deductions line by line, which means that you will need to keep a close eye on what money is spent on throughout the course of the business year, including providing necessary documentation for purchases such as receipts or paperwork. These documents can include bank statements, bills, check stubs, and more.