Category: tax deductions

3. The Standard Deduction: When individuals have minimal below-the-line deductions, they are directly granted a standard deduction. The standard deduction under different heads in 2004 was as follows:
i) Single $4,850
ii) Head of household $7,150
iii) Married filing a joint return $9,700
iv) Qualifying widow(er) with dependent child $9,500
v) Married filing a separate return $4,850

4. Miscellaneous Itemized Deductions: These usually include:
i) Interest paid
ii) Taxes paid
iii) Losses incurred
iv) Charitable contributions
v) Medical costs borne

Such miscellaneous deductions are permissible if and only if they surpass 2% of adjusted gross income.

Keywords: Tax Deductions, Tax Savings, Tax Planning

2. Deductions: In addition to the standard deduction, some common above-the-line deductions include:
i) Trade/ Business expenses
ii) Alimony
iii) IRA contributions
iv) Net capital losses
v) Expenses incurred due to property used for income generation

Income tax laws are not easy to understand. It is therefore always possible that individuals choosing the standard deduction may or may not be able to take advantage of other deductions.

Keywords: Tax Deductions, Tax Savings, Tax Planning