For the most part, there are two tools to reduce your income tax burden: credits and deductions. Credits count directly against your taxes owed. For example, a $200 credit can reduce your taxes owed by $200. Deductions (as discussed in another post) reduce your income that is subject to tax. For example, a $200 deduction…
Read More Tax Basics: CreditsSome of the biggest misconceptions in taxes come from deductions. People are told they can deduct this expense or that expense, but often find they cannot when it comes tax time. Exactly what is deductible depends on the type of deduction and what kinds of income you have. This post will hopefully clarify what is…
Read More Tax Basics: DeductionsThe US tax system is complicated. (Profound, I know.) Before you can even pick a filing status (discussed in another post), you need to be aware of who should be included on your tax return. In general, you receive a tax benefit that reduces your tax liability for each person listed on your return. But,…
Read More Tax Basics: DependentsFiling statuses are usually the first choice you need to make when completing a tax return. Most tax software will dynamically give other choices based on this initial decision. Depending on your choice, you qualify for various other tax credits and deductions. But is it a decision? For the most part, your filing status is…
Read More Tax Basics: Filing Status