Every year you sit down to go through your taxes dreading the outcome. Will you get money back or have to pay? Just filling out the forms can be confusing and tiresome but it is required for all Americans. Although it won't make the forms less challenging, one way to lower your tax bill is to lower your taxable income which is calculated by removing (a) excluded income, (b) exemptions, and (c) permissible deductions from the individual's gross income.

Understanding what deductions you can take on your taxes can help to lower your taxable income. Many people do not understand the basics rules of these laws and this can cost you money. It may be in your best interest to hire a tax expert to do your taxes - it could be money well spent!

Some common exemptions which are excluded from gross income include: - Earnings made from life insurance contracts - Earnings made from gifts and inheritances - Proceeds granted for personal injuries - Interest received from state and municipal bonds Of course nothing in the tax law is cut and dried and all these exemptions are subject to certain conditions. If you do want to avail yourself of these exemptions a tax advisor can help you with the specifics.

The standard deduction on your taxes is a certain amount of money you get to deduct from your taxable income provided you have no itemized deductions. This amount varies depending on your classification. You may be classified as single, head of household, married filing joint return, widow(er) with dependant child, married filing separate return,

Some other deductions you may be able to take include: - Trade/ Business expenses - Alimony - IRA contributions - Net capital losses - Expenses incurred due to property used for income generation Again, you will want to check with your tax advisor if you are taking the standard deduction as well as some of the deductions above as there may be some rules as to how much or if you can take both.

If you own a home or had certain loses or medical expenses you will probably want to itemize your deductions. Itemized deductions usually include: - Interest paid on mortgages - Property tax - Employee transference expenses - State and Local income tax - Taxes paid - Losses incurred - Charitable contributions - Medical costs Some deductions such as the medical costs are only allowed if they surpass 2% of your adjusted gross income so be sure to read the instructions carefully when filling out the form for these.

Anyone who has sat in front of a tax form knows how difficult these are to understand and fill out. There are many software programs that can help you with this daunting task and even some that you can use right online which will file electronically for you. If you don't want to use software, consider using a tax professional especially if your taxes are complicated



About the author:

Lee Dobbins writes for For Your Wealth where you can find out more about your money and wealth. Visit their article archive for more articles on taxes .