Understanding tax deductions is essential for individuals looking to maximize their take-home income. Deductions allow taxpayers to exempt portions of their income from taxes, differentiating them from tax credits, which reduce tax liability dollar-for-dollar. However, not everyone qualifies for available deductions. For instance, the mortgage interest deduction applies only if you itemize your taxes, which may not be beneficial depending on your deductible expenses. Similarly, the medical expense deduction requires out-of-pocket costs to exceed 7.5% of your AGI, highlighting the importance of consulting tax professionals to navigate these intricacies effectively.
In 2025, the standard deduction for single tax-filers is $15,000, or $30,000 for married couples filing jointly. It may not make sense to itemize.
Healthcare can be a huge expense, but you can only claim a medical expense deduction if your out-of-pocket costs exceed 7.5% of your adjusted gross income.
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