The federal income tax deduction is a statutory requirement under the American laws. It has to be paid by all American citizens who fall under the tax bracket as decided by the American government. Taxable income is calculated by removing (a) excluded income, (b) exemptions, and (c) permissible deductions from the individual s gross income.
The following are the heads under which you can avail the tax deduction:
1. Exemptions: Some common exclusions from gross incomes are:
i) Earnings made from life insurance contracts
ii) Earnings made from gifts and inheritances
iii) Proceeds granted for personal injuries
iv) Interest received from state and municipal bonds
It must however be noted that all of the above exemptions are subject to certain conditions, and thus a tax adviser s help must be taken while availing these exemptions.
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