Tax Tips and FAQ
Do I need to file a return?
Generally, if your income does not exceed the standard deduction a return is not required. HOWEVER, you will need to file if you are entitled to a refund of withholdings or tax credits, Additionally, if you plan to apply for a mortgage, other loans, or certain government programs, you may need to file a return.
What is a standard deduction vs. itemized deductions.
Every tax payer is entitled to a standard deduction, the amount of which is dependent on your filing status (single, married filing jointly, head of household, etc). You may choose to itemize your deductible expenses if your deductible expenses exceed your standard deduction.
What expenses are tax deductible?
The most common deductions are mortgage interest, state and local taxes, medical expenses (subject to limits), student loan interest, and charitable donations. This is hardly a comprehensive list and some deductions are subject to limits.
What is tax credit vs. tax deduction?
A tax credit such as the child tax credit, earned income credit, or child care credit, is a credit toward tax owed. For example, if you owe $1000 in tax and you get a $500 tax credit, you now owe $500 in tax. A deduction simply reduces your taxable income. For example, if you have a $1000 tax deduction and you are in a 10% tax bracket, your tax owed is reduced by $100.