Income taxes provide the primary source of revenue that funds the operation of the U.S. government, but not all income is subject to income taxes. Most individual taxpayers have the option of excluding a portion of their income from taxation by claiming the standard deduction or by itemizing their deductions. The majority of individual taxpayers claim the standard deduction, but the Internal Revenue Service recommends taxpayers figure their taxes both ways and choose the method that provides the greatest deduction.
Medical And Dental Expenses
A taxpayer may be able to deduct a portion of medical and dental expenses she paid during the tax year for herself, her spouse and her dependent children. She may only deduct expenses that were not paid for or reimbursed by a health insurance policy. She may only deduct the amount of medical and dental expenses that exceeded 7.5 percent of her adjusted gross income.
Certain non-business taxes may be deductible, including state, local and foreign income taxes, real estate taxes, personal property taxes, sales taxes and qualified motor vehicle taxes. The taxes must have been imposed on the taxpayer who deducts them and they must have been paid during the tax year.
Home Mortgage Interest
A taxpayer may deduct the interest he paid on a mortgage for her primary residence and a second home. Points are considered to be a form of mortgage interest and may usually be deducted in the tax year they are paid. Investment interest may also be deducted, but is limited to the amount of the taxpayer's investment income. Other types of interest such as interest on consumer loans or credit cards is not deductible.
A taxpayer may deduct contributions she made to charities during the tax year. Qualifying charities include religious organizations, charitable organization, educational organizations, scientific organizations, literary organizations, organizations for the prevention of cruelty to animals or children and certain amateur sports organizations. Contributions may be in cash, cash equivalents or goods.
Individual taxpayers who incur certain expenses associated with their job may be able to deduct a portion of those expenses. Qualifying expenses may include business use of a vehicle, business use of the home, business travel expenses, business entertainment expenses and other employee business expenses. Only unreimbursed business expenses may be deducted.
A taxpayer who paid for education that was required for her current job, or that helped to improve or maintain the skills required for her current job, may be able to deduct those expenses as an itemized deduction. Qualifying expenses may include tuition, books, fees, transportation costs, research costs and the cost of supplies. Expenses for education associated with helping the taxpayer get a promotion or a different job do not qualify as a tax deduction.
- IRS.gov: Topic 502 - Medical and Dental Expenses
- IRS.gov: Topic 503 - Deductible Taxes
- IRS.gov: Topic 505 - Interest Expense
- IRS.gov: Topic 506 - Charitable Contributions
- IRS.gov: Topic 514 - Employee Business Expenses
- IRS.gov: Topic 513 - Educational Expenses
- IRS.gov: Instructions for Schedule A (pdf)