What Are Federal Income Deductions?

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  • Written By: B. Miller
  • Edited By: Andrew Jones
  • Last Modified Date: 05 November 2018
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Federal income deductions refer to those reductions that may be taken when filling out a tax return that effectively reduces the amount of taxable income, and therefore the amount of year-end taxes that must be paid. Federal income deductions are often broken into two categories: "above the line" deductions that can be taken whether or not an individual is able to itemize, and then additional deductions such as medical expenses that can be taken if the tax return can be itemized. It sounds complicated, and sometimes it is, but there is plenty of advice to be found online, on independent and government websites, or through an accountant who can provide advice regarding deductions. The rules for deductions will vary from country to country, and the explanations provided here are general and may not apply to every location or situation.


It is important for an individual to be sure to take all the federal income deductions that he or she qualifies for; otherwise, she will be paying more taxes than necessary. Figuring out the "above the line" federal income deductions, which may be taken by everyone regardless of itemization, is the best place to begin. The most basic of these are contributions to a retirement fund, and interest paid on student loans. Capital losses also go here, as well as contributions to health savings accounts, certain business, or moving expenses, and a portion of self-employment taxes paid, in some cases. Not every person will qualify for every one of these deductions, but it is always a good idea to check.

Other federal income deductions will typically require certain income and expense qualifications to be met. Put simply, a person or family filing an income tax return will be able to take the standard deduction to, an amount pre-determined by the government to reduce taxable income, unless their qualified expenses add up to more than the standard deduction. In this case, the person or family is then able to itemize deductions in qualified categories.

Certain federal income deductions can be itemized, and typically include interest paid on mortgage or home equity loans, as well as losses due to theft. Charitable contributions also fall into this category, as well as medical expenses paid -- for instance, payments made before an insurance deductible was reached, or payments required for services not covered by insurance. Certain types of taxes, such as state, local, or real estate taxes may also be able to be itemized and deducted. It is important to remember that it is only a good idea to itemize deductions if they add up to more than the standard deduction. Otherwise, taxable income will be higher than it needs to be.



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