What does the sentence "It's tax deductible" really mean?

Answer 1

You subtract the cost of that item from your total earnings when filing your tax.

Answer 2

Usually this is when you make a donation to an organization or something. Tax deductable means that at the end of the year you can claim it on your taxes, so you don't pay taxes on that money.

Answer 3

The truth is there are several ways in which you can "deduct" an item; from your "gross income" as in Schedule C deductions, or from your "adjusted gross income" as in Schedule A or itemized deductions. The schedule C deduction is worth more to you than the schedule A deduction because it reduces your self-employment tax as well as your income tax and it also reduces your "adjusted gross income" (AGI)which will increase the deductibility of schedule A medical and miscellaneous deductions because of medical deductions must exceed 7.5% of your AGI and miscellaneous must exceed 2.5% of your AGI.

A "tax deduction" is not as valuable to you as a "tax credit" because the credit comes right off of the tax rather than reducing the taxable income amount.

Answer 4

Basically, it refers to expenses that the cost of which are subtracted from your taxable income. Eg let's you make 50k per year and the total of allowed deductions from your expenses add up to $3500. You would only be taxed on $46,500. of your income. If you have paid taxes in advance (W2) it is likely you will get more back as it would have been figured on the $50k. It is a little more complicated but that's the jist of it.

Answer 5

The it falls into a category that is deductible from your earned income - like charity deductions.

Answer 6

It's deductible against your income taxes if you itemize.

Answer 7

for example: if you have an old car and you want to get rid of it...instead of giving it away, you can donate it and when tax season comes, it can be "tax deductible" and you get money for it in the end. you help a cause and get your money : )