As a single taxpayer having a gross total income of $45,000, I fall into the 25% tax bracket. A total of $7,022 is hence, required to be payable as income tax for the year 2016 at a rate of 15.6%. The next lowest tax bracket is the 15% bracket that includes income from $9,276 to $37,650. My gross total income is hence, $7,350 away from the 15% tax bracket.
A standard deduction of $6,300 is available for single filers that can reduce my gross total income to $38,700. Alternatively, itemized deductions are available to bring down the total tax payable. These are listed as follows:-
Medical expenses such as health insurance premiums and dental care- Deduction allowed only when medical expenses are more than 10% of adjusted gross income.
Business or Employment expenses such as business costs or unreimbursed expenses- Unreimbursed expenses incurred during employment are allowed only when they “add up to more than 2 percent of your AGI” (Bird, 2012).
Interest paid on Home Mortgage- Allowed when the mortgage is secured by a qualified house property.
Any loss due to theft or accident.
According to the itemized deductions listed above, medical expenses would need to be more than $4,500 and business or job expenses would need to be more than $900 during the year. In addition to the above, interest on the mortgage, local taxes and losses would be required to be more than $1,950 in order to be eligible for the 15% tax bracket. If however, itemized deductions do not exceed $6,300, it would be better to opt for the standard deduction.
A reduction of $7,350 is clearly difficult to achieve during the current year. In order to achieve the desired tax deduction for the next year, charitable donations can be made; house property may be used for business purposes to claim a further deduction and medical expenses may be increased.
References
Bird, B. (2012). What Kind of Tax Deductions Are for a Single Person With No Dependents & No House. The nest. Retrieved 29 January 2017, from http://budgeting.thenest.com/kind-tax-deductions-single-person-dependents-house-27091.html
