When they say donations and home equity loans are tax deductible, what does this mean? Does a $1000 donation mean $1000 less federal income tax? Does $1000 paid in interest on a home equity loan mean $1000 less federal income tax?
2007-01-13 09:46:46 · 4 answers · asked by djchuang 2 in Business & Finance ➔ Taxes ➔ United States
No, these become part of your Itemized Deductions if you plan to itemize. The Itemized Deductions reduce your taxable income, which in turn decreases the amount of tax you would owe.
For example (all hypothetical numbers), if your gross income 20,000 and your itemized deductions are 6,000, then your taxable income becomes 14,000. And the tax is calculated off 14,000. (Of course there is still an exemption to account for, but that's not what we are talking about).
Tax credits reduce your amount of tax directly. Deductions reduce your income. I hope this all makes sense.
2007-01-13 09:55:15 · answer #1 · answered by Kristy 2 · 1⤊ 0⤋
No.
A deductable expense reduces your taxable income which is used to calculate the tax.
For example: If you are in the 25% bracket, a $1000 donation (or home loan interest) would save you $250 in taxes ($1000 x 25%).
2007-01-13 09:54:41 · answer #2 · answered by Wayne Z 7 · 1⤊ 0⤋
usually, definite. There are some homestead fairness loans that fall outdoors the tax deduction regulations, yet those are few. at the same time as getting the fairness personal loan, examine with the inner most loan officer or someone on the loaning company to verify the pastime is deductible.
2016-12-02 05:38:22 · answer #3 · answered by ? 3 · 0⤊ 0⤋
The deductible is to the amount the tax percentage is applied to. So if you make $50,000, you can deduct $1,000 to make your base $49,000. And then 15% is applied to the new base.
This is a very basic explanation - a lot more goes into it. But this should give you an idea.
2007-01-13 09:54:29 · answer #4 · answered by LifesAMystery 3 · 1⤊ 0⤋