They say tax is an inevitable part of life, but this doesn’t mean its all bad! Tax deductions are a sweet little way to top up your bank account. Here’s how:
So… what actually are tax deductions?
Tax deductions are expenses that lower your pre-tax income.
There are three main types of tax deductions:
- Work expenses (think computer for a designer, or a hammer for a tradie)
- Charitable donations (as long as they have DGR status)
- Voluntary super contributions
What is the benefit of lower pre-tax income?
Less taxable income has two potential tax reduction benefits:
- You pay tax on less income
- You might pay a lower marginal tax rate
How do I claim a tax deduction?
You claim a tax deduction as part of your tax return.
Claiming tax deductions during tax time might mean that you get a boost on that sweet tax time return!
And increasing your tax return means more money in the bank for you! Not bad at all.