I hear on TV people talking about deductibles when filing taxes. What does that mean? I think on the Simpsons they said having Maggie is a deductible. Deducting what from what? I’m not American, so I don’t follow that system.
Follow-up: I think I understand it a lot more now. The government will set out criteria which will entitle you to pay less tax. It’s your job to notify the tax man at the start/end? of the tax year, so that you pay what’s deemed correct.
In: 8
The amound of a tax deduction is removed from your taxable income when figuring out what taxes you owe. If I make a $1,000 donation to a charity and I made $65,000 that year, when figuring out my taxes my taxable income is reduced to $64,000.
It’s important to note that it reduced your taxable income by $1,000 and not your owed taxes by that amount. In the above example, the owed (federal) taxes would be reduced by $220.
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