Business Mathematics Brief 12th Edition by Stanley Salzman ,Gary Clendenen, Charles Miller

Exercise 68

List four possible tax deductions, and explain the effect that a tax deduction will have on taxable income and on income tax due. (See Objective.)
O BJ E CTIVE 5 List possible deductions. Actually, taxpayers may deduct the larger of itemized deductions or the standard deduction from their adjusted gross income before finding taxable income. This is particularly applicable to individuals who are paying interest on a home loan, but sometimes others can use this to their advantage. The most common tax deductions are listed next.
Medical and dental expenses: Only medical and dental expenses exceeding 7.5% of adjusted gross income may be deducted. This deduction is effectively limited to catastrophic illnesses for most taxpayers. Expenses reimbursed by an insurance company are not deductible.
Taxes: State and local income taxes, real estate taxes, and personal property taxes may be deducted (but not federal income or gasoline taxes).Interest: Deductible interest includes interest on a home mortgage and qualified interest on other real estate. Other personal interest is not deductible.
Gifts to charity: Gifts to an eligible charity (such as a church) are deductible.
Casualty or theft losses: Losses due to a casualty (e.g., fire) or theft are deductible if not reimbursed by insurance.
Unreimbursed job expenses , tax preparation , and miscellaneous deductions: These expenses are deductible only if the total exceeds 2% of the taxpayer's adjusted gross income.