Tax deductions

Training 875 minutestax deductions

You are 44, a teacher with two kids, and your son is in college. A deduction cuts your tax for spending the state wants to encourage. The money is on the table, and paperwork is how you collect it.

Training goal: Claim the tax relief you are entitled to

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Situation

1. This year you pay $3,000 for your son's college and $1,200 for dental work. A coworker shrugs: "Deductions are for rich people."

Check the tax office site for deductions
Trust your coworker, skip it
Claim every deduction you read about

2. The clinic hands you just a receipt. The deduction needs a contract and a payment statement.

Take the receipt, that will do
Ask for the contract and statement now
Toss the papers after paying

3. The claim is approved: $520 back. Your daughter wants a new phone, and the credit card carries $2,000 at 25%.

Buy the phone, it is extra money
Put the $520 into your cushion
Pay $520 off the credit card

4. Your employer offers a retirement account and adds 50% to your contributions up to $100 a month. Contributions also cut your tax, and the card is not paid off yet.

Put in $100 to collect the match
Clear the card first, the account later
Go all in, $300 a month

What you will learn

Deductions return part of your tax for education, health, housing and retirement, and the list depends on your country.
Get the papers on the day you pay and keep them in one folder.
Send a tax refund to your cushion or your priciest debt.

Your real-life step

Start a "Deductions" folder with this year's receipts and contracts. Check your country's list of deductions on the tax office website.

Questions and answers

What is a tax deduction?

An amount that lowers your taxable income or your tax. You pay less or get a refund.

What is the difference between a tax deduction and a tax credit?

A deduction lowers the income your tax is based on. A credit cuts the tax itself by a set amount, so it is usually worth more. Terms vary by country.

How far back can I claim a tax deduction?

Many countries let you claim for several past years, often up to 3 to 5. Check the exact limit in your country.

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Numbers are illustrative. A game, not financial advice.