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Tax Deductions

Credit: StockMonkeys.com
Source: http://www.flickr.com/photos/86530412@N02/8194660049/
License: CC BY-NC 3.0

Every April, Americans struggle to fill out their tax forms. They get help from accountants and computer programs in order to figure out what they can deduct from their taxes. Why do workers spend so much time figuring out their tax deductions?

Taxable Income

American workers have to pay income tax on the money they earn. However, the government doesn’t tax them on everything. Medical expenses can be exempt from tax. In some cases, adoption expenses are tax free. There are standard deductions depending on the number of adults and children in the household. These deductions are supposed to help protect the basic money people need in order to get by. However, if you owe $1000 in tax, but find a $453.21 deduction, that doesn’t mean that you now only owe $546.79. Tax deductions come out of your taxable income—not directly out of the taxes you owe. This means that a large deduction may only lower someone’s actual taxes by a little bit.

Credit: Images of Money
Source: http://www.flickr.com/photos/59937401@N07/5856616883/
License: CC BY-NC 3.0

As soon as you get your first job, you’ll have to start paying income taxes. Your boss will take them out of your paycheck. You’ll also have to pay Medicare and Social Security taxes, which fund health and social welfare programs for retirees and senior citizens. If you file a tax return at the end of the year, you may get a partial refund, which indicates that you paid extra income taxes over the course of the year. The government will return any extra money you paid.

See for yourself: http://www.youtube.com/watch?v=oKLtwk_Jh6o

Explore More

At the following links, learn more about taxes and how they affect teenagers like you.

http://www.youtube.com/watch?v=-2JGlKoTrsQ

http://www.bankrate.com/finance/taxes/teen-jobs-and-tax-issues-1.aspx

http://on.aol.com/video/kansas-city-teen-hit-with-hefty-tax-bill-for-part-time-job-517657779

Image Attributions

  1. [1]^ Credit: StockMonkeys.com; Source: http://www.flickr.com/photos/86530412@N02/8194660049/; License: CC BY-NC 3.0
  2. [2]^ Credit: Images of Money; Source: http://www.flickr.com/photos/59937401@N07/5856616883/; License: CC BY-NC 3.0

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