Laws in many nations enable taxpayers to claim tax deductions for certain kinds of expenses. Generally, allowable tax deductions include retirement plan contributions, healthcare costs, education expenses and certain debt related expenses. Additionally, allowable deductions for self-employed people often include business related charges and even mortgage and car loan payments, in some cases.
In many countries, pension plans are funded with gross rather than net earnings which means that a taxpayer can claim a tax deduction for an annual plan contribution. Caps limit allowable deductions both for individuals and for couples who file their taxes jointly. Additionally, businesses can often claim deductions for contributions made on behalf of employees.
Healthcare costs including medical insurance premiums are among the allowable deductions commonly used in nations that lack a national healthcare service. Prescription costs, physician's co-pays and fees for x-rays and other types of examinations are often deductible. Laws in many places also enable taxpayers to claim life insurance premiums as tax-deductible expenses.
Local or national governments fund educational establishments in many countries but people who send their family members to private schools can often claim tuition expenses as allowable deductions. College tuition, accommodation fees and charges for books are among the other types of educational costs that taxpayers can normally deduct from their taxes. In most instances, taxpayers can claim tax deductions for their own educational expenses as well as costs incurred by immediate family members. Some nations have laws that prevent people from claiming tax deductions related to their children's educational expenses once those children have reached adulthood.
Mortgage interest payments are tax deductible in many areas. Some taxpayers can also claim deductions for credit card interest payments and finance charges on other types of debts such as automobile loans or student loans. Additionally, allowable deductions in many places include property insurance, property tax and home maintenance costs.
Aside from consumers, business owners can also claim deductions for various operating expenses including finance charges, inventory purchases and equipment rental. Self-employed individuals can sometimes claim a tax deduction for a family vehicle if that vehicle is sometimes used for business purposes. In many countries, self-employed people can claim business expenses on their personal return in which case they may have the option of classifying a mortgage and other debts as either a personal or a business deduction.
Many taxpayers itemize deductions but some nations permit taxpayers to claim a standard deduction. People who fail to keep records of their deductible expenses often claim the standard deduction. In some instances, the standard deduction may exceed an individual's actual allowable deductions.
