Tax Deduction Formula:
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Tax deductions are expenses that can be subtracted from your taxable income, reducing the amount of tax you owe. Common deductions include business expenses, charitable contributions, medical expenses, and certain education costs.
The calculator uses a simple summation formula:
Key Points:
Benefits: Proper deduction tracking can significantly reduce your tax liability, potentially saving you hundreds or thousands of dollars each year.
Instructions: Enter your allowable expenses in the fields provided. You can enter up to 4 expenses (leave blank if you have fewer). The calculator will sum all valid entries.
Q1: What expenses are typically deductible?
A: Common deductions include mortgage interest, state taxes, charitable donations, medical expenses above 7.5% of AGI, and unreimbursed business expenses.
Q2: Is there a standard deduction?
A: Yes, you can choose between taking the standard deduction or itemizing your deductions, whichever is greater.
Q3: How do I know if an expense is deductible?
A: Consult IRS guidelines or a tax professional. Deductibility depends on the expense type and your specific circumstances.
Q4: Should I keep receipts for deductions?
A: Yes, you should maintain documentation for all deductions in case of an audit. Keep records for at least 3 years.
Q5: Are deductions the same as tax credits?
A: No, deductions reduce taxable income while credits directly reduce tax owed. Credits are generally more valuable.