What is a “deductible”, regarding American tax assessments.

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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

I think you are confusing the terms “deduction” and “deductible”.

In the context of taxes, certain actions may result in the tax filers being able to claim an exemption of part of their income from income taxes. This is called a tax deduction.

Having a dependent is one common deduction that many apply to some filers.

You take your total gross income, subtract anything the government allows you to “deduct from your gross income” to get your taxable income and pay taxes on that lower number

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.

A deduction is an amount of money that you can subtract from your income before paying taxes. It reduces the amount of money you owe taxes on.

If my income for the year was $50,000 and I had a $1,000 deduction, I would only have to pay income tax on $49,000.

The list of things that you can claim as a deduction is practically endless.

In the us system you have your gross income of whatever you make per year

You can then use deductibles to basically remove a portion of your income from taxes.

The standard deduction in the us is around $10,000 so if you made $50,000 per year you do taxes as if you made $40,000 that year. This obviously means you pay less in taxes.

You can forgo the standard deduction and deduct a bunch of other stuff spelled out by the IRS. The common example is charitable donations

Unfortunately it’s a bit complex.

However worth mentioning taxes usually come out each paycheck based on your income and a few other things and then you basically compare your end of year “how much taxes did I pay” and “how much taxes was I supposed to pay” and if you did it right you would have paid more than you were supposed to, and get a refund check.

Tldr deductibles or deductions are things Americans can claim to basically delete income from tax assessments. Every American should also claim at least 1 deduction..most claim the standard deduction but some people will itemize a list and claim them instead.