In America we pay taxes. There are local taxes, state taxes and federal taxes. That’s obviously just the beginning of the story of things being taxed in the richest country of all time. Saving on taxes is all about the little things here and there, so let's take a quick peek at the standard deduction.
First of all, it depends on who you are, and by that I mean: what’s your filing status? Well, it depends on your taxable income, of course, as well as a few other factors, and this is something you should know. The most basic thing to understand about the standard deduction is that you can either take the standard deduction OR choose to itemize your deductions. You cannot do both. Your friends and family and co-workers are going to tell you to do all sorts of different things to save money, and I’m not going to add my two cents on to that pile of advice, no sir. There are so many variables that it just depends.
If you don’t have an explicit understanding of just what the standard deduction is, let me explain it to you. Like many phrases and concepts we use on a daily basis, we're not always sure what they mean or how to define them. Basically, the standard deduction is a dollar amount that gets subtracted from your income.
If you’re running your own business, or have anything else of that financial nature going on in your life, the standard deduction probably won’t cut it because you’d be missing out on a lot of other tax opportunities.
If you’re a standard deduction sort of individual like myself, you should definitely know that these amounts that get subtracted from your taxable income are going to change once you become a certain age, and will also change depending on if you’re filing as a single person or as a married couple. The amounts for all types of standard deductions change every year, according to what seems like some kind of a mysterious formula.
But wait--there’s more. Some people cannot claim a standard deduction. Like for instance, a married person whose spouse is itemizing his or her deduction will not be able to take a standard deduction alongside that action. If you’re a nonresidential alien, forget about it. And if there’s been a change in your accounting period, and you’re filing a return for less than twelve months, forget about it. Finally, if you’re taking part in an estate or trust, a partnership, or a common trust, then guess what, forget about it!
Luckily for you, there are all sorts of killer tax software online. Maybe you’ve heard of them, like TurboTax Online? Well the rumors are true, and TurboTax Online will discover every single situation that may possibly apply to you, for your benefit, automatically. You can’t get a bigger deduction elsewhere.
And that, class, is most of what you’ll need to know in regards to the wonderfully thrilling topic of standard deductions.