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Income Tax and Deductions Essay

Tax avoidance is legal in most states and every tax payer will present his returns in a way which reduces tax burden the most. Thus a taxpayer will opt for either standard deduction or itemized deduction whichever will enable him shoulder less tax burden. For standard deduction the deduction from taxable amount is a standard amount. For example for a single citizen the standard amount is $5,350. For married couples filling jointly the standard deduction will be double for the single ($10,700) but for a married couples filing separately each will be allowed a standard amount like for a single person it is $5,350.

A qualifying widow(er) with dependant child will be treated the same way a married couple filing jointly. For the head of household whether a woman or a man the deduction will be $7,850. Itemized deduction is enjoyed by adjusting your spending behavior to spend more on the items which enjoy tax privileges. Similarly one can claim dependant from a qualifying child or relative which has tax benefits such as the Child Tax Credit, the Child and Dependant Care Credit as well as the Earned Income Credit. These all work to the advantage of the tax payer.

The standard deduction for a dependant is the higher of $850 and the dependants earned income plus $300 provided it does not exceed the standard deduction of the filing taxpayer. However in some instances the treatment gives some taxpayers unfair advantage over others. For instance a parent can claim a qualifying child but don’t claim the child as his/hers. Thus another parent can claim dependant deduction from the same child provided the AGI of the person higher than the highest AGI (Adjusted Gross Income) of the two parents. This can be misused by the taxpayers who have higher AGI than other parent thus enjoying unfair tax advantage.

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