Learn Tax Break Definition, Different Types, and How to Get One

The following are the standard deduction amounts for 2022 and 2023:

 

You can itemize the following deductions:

• Mortgage interest on the first $750,000 of secured mortgage debt (or $1 million if purchased before December 16, 2017).

• Unreimbursed medical and dental expenses in excess of 7.5% of your adjusted gross income (AGI)

• State and municipal taxes of up to $10,000

 

• Charitable contributions

• Losses from accidents and theft

• Losses from gambling

If the total of your itemized deductions exceeds your standard deduction, itemizing makes financial sense.

Tax Exclusions

A tax exclusion shields a specific amount or type of income from taxation. Child support payments, life insurance proceeds, and municipal bond income, for example, are often deductible from taxable income.

Similarly, health insurance premiums paid by your employer are exempt from federal income and payroll taxes, and the share of premiums you pay is generally not taxable income. Another major tax exemption is for home transactions.

If you have a capital gain from the sale of your primary residence, you can deduct up to $250,000 ($500,000 if married and filing jointly) from your income. To be eligible, you must:

• Have owned and lived in the home for at least two of the last five years

• You have not deducted the gain from the sale of another home in the last two years.

In addition, if you make income in another nation, you may be entitled to a tax deduction under the overseas earned income exclusion. Individuals pay $112,000 for the 2022 tax year and $120,000 for the 2023 tax year.