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Doing your taxes isn’t exactly an experience that anybody would describe as fun. As if having to give up a bit of your money isn’t reason enough to already dislike the process. It’s no surprise that most people might want to just get it over with and to take the easy route by opting for a standard tax deduction.
But, if you’re trying to minimize the amount of outward cash flow, you might want to reconsider your options, especially if you want to be able to save as much money as you can. When paying federal taxes, there are two tax deduction options you can choose between. You can either opt for a standard tax deduction or an itemized tax deduction. You may be surprised at how much of your tax you can actually shave off if you take the time to look into it.
The Premise
Income Tax is a tax that is paid to the government whenever income is derived, under the assumption that the income was earned because the government maintains the favorable conditions that are necessary for the citizenry to earn an income.
These conditions can come in the form of security (when police officers are able to keep the peace and order at the places where business is conducted), utility (when you are provided with resources like water and electricity), and accessibility (when the roads are beneficial to your business whether it’s in the form of allowing your customers to find your business or when you use the roads to transport your products to your customers).
So, in essence, any time that you earn an income, you have to give a portion of that income to the government as a means to help maintain the facilities and utilities that benefit you. This is an important point of view because it helps taxpayers view the prospect of paying taxes less unfriendly. Remember that we’re no longer in the times of ancient civilizations when taxes were subject to abuse. Things are much more just than they were back then.
Tax Deduction Defined
A tax deduction lowers a person’s tax liability by lowering his taxable income. Tax deductions usually include expenses that a taxpayer incurs that lower a person’s gross income. Fuel, for example, can be itemized for a tax deduction. A fairly common practice is to use a mileage tracking app so that users have a record that they can use for either tax deduction or reimbursement.
The Weigh-In
Standard deductions are often the route that taxpayers take because it does not require any calculation. However, there are certain scenarios when itemizing your tax deduction might save you a bit more than a standard deduction would. A prime example would be when you’re married and are filing jointly, when you have several major expenses like a home or a car, major medical expenses and if you put money into a retirement fund.
