Tax Write-Offs for Individuals
Annual taxation is important revenue for any government, with the help of which, welfare activities are financed. The department or ministry of revenue collects a series of annual taxes from the citizens, for example, the sales tax on sale activities, income tax that is applicable for the amount of income, excise duty for the activity of production, and customs duty for import and export of goods.
There are also some specialized taxes such as the value-added taxes or the property taxes, that are collected for some specified activities. Income tax is probably the important tax that is collected by almost all governments, across the world. In the United States of America, income tax is collected annually, by the federal agency, Internal Revenue Service. The taxpayers in the US file for what is known as an income tax return, which enables them and the IRS to transact the entire tax amount.
What are Tax Write-Offs?
The term ‘write off’, has its origin in the field of finance and accountancy. This term basically implies a reduction in the value of assets or liabilities and even transactions. The concept of write off is often used as a synonym of ‘depreciation’ or ‘mark down’ entries and transactions. The same conception is also applicable for taxation. If we take a look at finance theories, tax liability is considered as a noncontingent liability of any individual or organization, that has a maximum preference as per regional laws, accounting standards, and IRS guidelines.
The tax write-offs, in short mean, the reduction in the total amount that is taxable. The usage of term is however at times debated and some countries also use the term tax write-offs in context with tax credit, which reduces the amount of tax paid.
List of Tax Write-Offs
The following is a small list of all tax write-offs that can be availed while filing Form 1040, of the IRS. If you want to have look at the taxation qualifications and provisions of the IRS, then you may refer to the IRS tax deduction list.
- Tax Write-Offs for Home Owners: There are several different types of tax deductions or rather write-offs for home owners. The most notable among these write-offs is the deduction of mortgage loan interest. The total interest that is levied on the mortgage for that very annum is deducted from the taxable income. Topic 504 of the IRS interface, that is titled as ‘Home mortgage points’, gives more precise details and procedures for the filing of such a write off. In addition to that, homeowners can also avail a home improvement tax deduction. The expenditure of home improvements is deductible from tax brackets, due to the fact that home improvement is a monetary addition to the value of the house.
- Tax Write-Offs for Individuals: There are several different deductions that individuals and married couples filing together, or married couples filing separately, can avail. The basic intention is that people who are self-employed or have their own business, often use personal assets in the course of their business undertakings. The IRS thus enables them to reduce their tax burden by providing them with tax write-offs for self-employed. A small business tax write off comes under the category of itemized deductions. Business Use of Home (Topic 509), Business Use of Car (Topic 510) or Business Travel Expenses (Topic 511) are some of the common itemized deductions that any individual can avail.
- Deductible Taxes: In addition to the above mentioned genuine tax deductions, there are several different types of taxes that you tend to pay to the local governing body as well as the state government. If the same tax is levied, then it results into what is known as a double taxation. According to the Topic 503, a taxpayer can also avail the deduction that is titled ‘deductible taxes’.
- Standard Deductions: A standard deduction is basically a deduction provision, where a fixed amount of taxable amount is written off. The standard deduction is changed occasionally according to the economic condition and on the basis of rise and fall of economic index percentages. It must be noted that one cannot avail the standard tax deduction and itemized deductions in the same annual income tax return.
In order to know more about the concept of tax write-offs, you can read more about concepts such as payroll taxes and tax debts. The taxes that have been written off are usually repaid to taxpayers in the form of tax relief checks. When you sit down to calculate the tax that you are supposed to pay, all you will need to do is follow the W4 US Taxation Form and Form 1040, on the website of IRS.